Just about everyone has heard of workers’ compensation insurance and know it is required by law, but there is so much more to it. Workers’ compensation provides wage replacement and medical benefits to employees injured in the course of their employment, in exchange for a waiver of the employees’ right to sue their employers for negligence in connection with the injury. Rising workers’ compensation costs are among staffing firm owners’ greatest concerns, and controlling such costs is among their top priorities, as double-digit rate increases have become common.
Each employee’s job position is assigned a risk classification code based upon the job responsibilities, duties and exposures that are typically represented as part of that occupational class. In most cases, these would be the risk classification codes of the positions at the customer site to which temporary employees are assigned. Often customers have a defined dominant class code filed with The National Council on Compensation Insurance (NCCI). NCCI is a U.S. insurance rating and data collection bureau specializing in workers’ compensation.
Rates for each class code are developed based upon the frequency and severity of the employees’ injuries and loss experience by state. Severity is measured by both medical payments and indemnity benefits, or payments made directly to an injured employee to compensate for losses suffered as a result of an accident. Rates are also affected by the actual loss experience of the individual staffing firm through the mandatory application of an experience modifier. The modifier can be a credit or debit based upon the company’s experience. This means the modifier can either increase or decrease the individual company’s assigned rate based on the company’s worker’s compensation total claims.
No single risk management technique is a home run for reducing workers’ compensation costs significantly. However, the following suggested best practices, when used collectively and in cooperation by staffing firms’ corporate employees, temporary employees, and customer, can significantly limit injury frequency and severity, and therefore reduce workers’ compensation costs.
These best practices of risk management cover the following areas:
- Operational philosophy
- Candidate screening, evaluation, and management
- Client selection, evaluation, and management
- Client contracts
- Injury prevention and protocols
- Claims management
- Modified duty or return-to-work programs
- Pricing methodology and financial metrics
- Classification codes
- Legal information
- Insurance carriers, brokers, and risk management consultants
Need assistance reducing or understanding your workers’ compensation risks? Let USA Staffing Services help reduce your risk.
Credit: American Staffing Association