Workers Comp Corner: Scared by things that go bump on the job
It’s that time of year.
Ghosts seem to appear around every corner. Witches on broomsticks fly thought the night sky. Haunted houses and hayrides fill the countryside. It’s time for all of those things that make Halloween in Vermont, a fun fright-fest every year.
During Halloween people expect to be surprised, spooked or scared. However, in everyday business, people don’t like surprises. Business owners don’t like to be spooked. Yet, there is one aspect of workers’ compensation that frightens employers no matter what time of year it is.
The company receives a call from its insurance broker. When the call is done, the business owner is white as a ghost. This was the call where the company is told that workers’ compensation premiums have gone up. That is never a good call, especially when the cost is much more than anticipated. The business wonders why this has happened and struggles to determine how to make up the difference in the annual budget projections.
There are a number of steps an employer can take to avoid this situation.
A company must be proactive and look ahead. All businesses should know the date of the insurance renewal. Once they know that date the company can work backwards from that point and put a plan in place.
The business should create a plan with the information potential insurance carriers will review before setting the premium. This will include some basic information on the business.
The company must know the total payroll for the business. That is a key figure for the calculation of premium. The company should also do their best to forecast whether it is expected that there will be an increase or decrease in workers over the coming year. An increase in workers’ will mean a larger payroll and therefore a higher premium. A lower payroll will mean a decrease in premium dollars.
The business should know what the classification is that is used for the employees. This is another important piece of information as every classification has a different rate. That rate corresponds with the actuarial determination of how likely it is for a person in that class of workers to get hurt and how severe injuries are likely to be. For instance, the premium for a clerical worker’s workers’ compensation insurance may be 30 cents on every $100 of payroll, while a landscaper premium may be $4.56 for every $100 of payroll. The company’s insurance agent can assist in determining both the classification of the employees at the company and the current rate for the classification code.
The business must also, well in advance of the renewal date, work collaboratively with its insurance agent to determine how the insurance companies will view the claims experience of the company. This usually involves an analysis of the number of workers’ compensation claims a company has incurred over the past three years and a review of the severity of those claims. If a company has an average experience, that is expressed as with a number one. If a company has more claims than average, then the number will be higher than the number one. If a company has more severe claims than the average company in its classification, then the number will also be great than the number one. If a company has fewer claims, or less severe claims, the number will be less than one. A company that has a higher claims experience pays more for their insurance then a company that has a lesser claims experience. This is arguably the only time that a business owner wants to strive to be below average.
A company that works collaboratively with its broker has the information at hand to avoid being spooked or scared when the bill shows up, whether the invoice is delivered by a ghostly ghoul, or a witch on a broomstick.
John W. Valente is an attorney with Ryan Smith & Carbine in Rutland. He is the author of “Understanding Workers’ Compensation: Managing Workplace Injuries and Lowering Costs.”