In doing research for this piece and being conscious of the fact the workers’ compensation is not nearly as sexy as that new marketing plan you were thinking about buying, I wanted to touch on one of those real world (and decidedly un-sexy) realities that any shop owner in the United States has to face and manage if he or she wants to be successful and thrive. Being a bit long in the tooth, which is to say old, I was not even aware that the U.S. had switched to the gender neutral term workers’ compensation. But with 51 percent of the workforce being female, it was the very least we could do, though way too late.
Workers' compensation is a form of insurance. It provides wages and medical benefits to employees injured on the job. In most cases, it comes in exchange for the employee's right to sue an employer for negligence. This tradeoff between assured, limited coverage and lack of recourse outside the workers’ compensation system is known as "the compensation bargain." Damages, both general and punitive for things like negligence, generally are not available in workers' compensation plans.
In the United States, most employees who are injured on the job have an absolute right to medical care for any injury, and in most cases, compensation for resulting disabilities, either short-term or permanent. Most employers, with the exception of those from Texas, are required to subscribe to insurance for workers' compensation, and an employer who does not can be fined. Texas employers have the ability to opt out of the workers’ compensation system under state law. These employers are known as “non-subscribers,” and are exposed to potential liability in the event of an on-the-job injury. Though the employee must prove that the employer was negligent in causing his or her injuries (this is significant), if successful, the employee can recover full damages, which are much more generous than workers’ compensation benefits.
Workers’ compensation is a compromise between an employer and its workers. In return for compensating employees who require medical treatment or who miss work due to a workplace injury, employers avoid potentially costly lawsuits. Coverage includes two types of protection: workers' compensation and employer's liability. The workers' compensation portion of the policy pays for claims made by employees, and the employer's liability portion pays the cost of defending lawsuits filed against the company by an employee or an employee's family. Workers' compensation benefits provide coverage for medical expenses as well as reimbursement for lost wages when employees are injured on the job. Every year workplace injuries affect thousands of employees and cost U.S. companies (employers) in excess of $100 billion. The chances are very good that you and your shop have or eventually will be part of this statistic and suffer that workplace injury.
Avoiding Becoming a Statistic
The best way to control your workers' compensation costs is to create a safe work environment. You might even consider safety training as one of your preventive measures. As work environments become safer, the number of workers' compensation claims continues to decline. At the same time, the cost per claim has risen more than 25 percent in the last several years, making the business expense and impact substantial. Workers' compensation is something that every small business owner with employees must deal with.
In the United States, the U.S. Bureau of Labor and Statistics has compiled data showing that five industries account for a vast majority of injuries that occur and where the vast majority of workers’ compensation claims are made.
• Emergency responders
• Transportation industry workers
• Cleaning professionals
• Law enforcement and those who work in the criminal justice program
• HVAC workers
Though I would admit to being surprised that the tire and automotive repair industries were not represented in this at risk group, the money spent and impact that workers’ compensation has on these industries is significant and trending upward, even as the number of actual claims declines.
Workers’ compensation laws rely on a "no fault" rule that provides benefits regardless of who is responsible for a workplace injury. There are exceptions for employees who hurt themselves due to reckless behavior or drug abuse, though rulings tend to give the benefit of the doubt to employees, except in the most extreme circumstance. In addition, employees who cause self-inflicted injuries, or injure themselves while off-duty or while engaged in a criminal act (boy this is all very comforting), usually do not qualify for benefits. State laws vary as to what kinds of activities are covered under workers' compensation.
There are a wide variety of state laws regarding what types of employees who qualify for workers’ comp benefits, and you should verify what your own state prescribes. Some states exclude volunteer workers, farm workers and others. States also have different interpretations about whether part-time employees qualify and regulations regarding how much coverage a business (your shop for instance) must have, what percentage of an injured employee's wages an employer would be required to pay if they are unable to work and how long an employer must cover an injured employee.
Responsibility as an employer will vary from state to state. It is universal in the U.S. that if one of your employees is injured, you need to immediately file a workers’ compensation claim with your insurance carrier. Your insurance carrier will then notify the appropriate state agency. A state agency typically reviews a case to determine whether it is valid and what benefits the injured worker should receive.
Timely reporting is an important key in all of this, particularly for the employer. Being slow to report, even if it is just you being lazy and not malicious, is a great way to assure a negative backlash, both from your injured employee who will feel mistreated and from a state agency, which is there to assure these cases are handled quickly and efficiently. If you have a worker who is injured, get on the phone to your insurance carrier and report it right away.
Here is a link that will help you know and understand rules and regulations unique to your state:
http://www.workerscompensation.com/workers_comp_by_state.php
Here is a link from the US Department of Labor that will help you identify who to talk to in your state if you have Worker’s Comp questions or concerns:
http://www.dol.gov/owcp/dfec/regs/compliance/wc.htm
The U.S. Department of Labor's Bureau of Labor Statistics shows that businesses spend on average just less than $27 per hour for each employee. This includes salary, as well as benefit expenses such as health insurance, vacation time, paid training, uniforms and, of course, workers' compensation benefits. Overall, 70 percent (or $18.90) of the hourly compensation given to employees goes toward salary, and 30 percent ($8.10) goes toward benefits, with 1.8 percent ($0.15) of that benefit percentage making its way to workers' compensation. Although 15 cents an hour isn’t much, it adds up and it can severely impact your ability to turn a profit, particularly if this expense increases substantially due to frequent injuries and claims.
Taxi drivers, police officers, firefighters, roofers and HVAC workers, all work where injuries are more common, and statistically have the highest risks, whereas office workers have the lowest risk. In a typical shop, technician’s rates would tend to run the highest and cashiers and bookkeepers significantly lower with service advisors somewhere in between. The basic rates for each job classification are set by each individual state. The main determining factor in workers’ compensation insurance premiums is the classification of job positions according to their level of injury risk. States set the basic rates for job classifications codes, of which there are more than 600.
Each state's workers compensation statutes are unique, so you need to check with your State Insurance Commissioner's office or your insurance provider to find out about rules that govern your shop. Depending upon where you live, you can buy coverage through the state or a private insurer; some states offering business owners a choice. If your state doesn't offer a state-run insurance fund and you don’t qualify for private insurance, you will be insured by an assigned risk pool. Workers' compensation premiums depend upon the nature of your business, the jobs your employees perform and the number of hours they work each week. Each job type is assigned a classification code. Riskier work, where statistics or your own safety record, show an increased occurrence or likelihood of injury, is classified as higher risk and assigned a higher premium. You might pay 55 cents in premiums for every $100 in payroll that goes to your cashier, while your technician’s premiums might set you back $7.75 per $100 of payroll.
Staying out of a state-assigned risk pool is critically important in controlling your workers’ compensation rates and to the viability of your business. If you are in an assigned-risk pool due to a poor safety record, you'll pay high premiums; it is as simple as that. Find out from your insurer or state agency why you are in a risk pool, and if the problem is your shop’s safety record, you should take immediate steps to improve safety and reduce the chance of accidents in your workplace. Enhancing workplace safety will improve your workers' safety as well as your bottom line. Everybody wins!
Safety is not you hanging a couple of posters and telling your people to be safe twice a year. It needs to be part of your shop culture, like quality or a dedication to great customer service and like anything else you, as the owner, think is important, you have to lead your staff to those safer pastures. If you are not committed to a safe shop, your shop is not going to be as safe as it could and should be. Give each employee a copy of your safety manual (create one if you don't have one) that details safety rules and safe work practices. Conduct regular inspections of the facility to identify and correct safety hazards such as poor lighting, unsafe conditions and cluttered work areas.
Communicate the importance of safety in the workplace and reward and recognize improving safe behaviors. Punish or reprimand habitual safety policy violators. Write and distribute safety procedures unique to your shop and enforce them. Start keeping records of all accidents and set reasonable goals for improvement, periodically inspecting what you expect. Create return-to-work programs for injured workers and stay in close contact with workers who are out injured and unable to work. Have the right shop equipment for the job. Provide protective equipment such as goggles, ear protection, helmets and gloves and make sure it is used. The best way to lower workers’ comp costs is to eliminate or reduce injury claims. And the most efficient way to do that is to create the safest work environment possible. This starts with a top-to-bottom safety assessment of your facility and a concerted effort to correct all the deficiencies that were noted.
A commitment to safety in your shop is an investment in your employees and a great way to safeguard the viability of your business. It is good for you, it is good for your business and it is very good for your bottom line.
A safe shop is a happy shop or at least one that is not paying out the nose for workers’ compensation insurance.
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