Employers know that they are required to carry workers comp insurance. However, many do not understand that without optimization, workers' comp costs can take an unnecessarily large chunk of a company's bottom line.
You can try to optimize your workers comp insurance yourself, but this will only go so far. To access lower rates, you will need to partner with a Professional Employer Organization.
Lower E-Mod Rates
Working with a Professional Employer Organization can truly benefit your organization in terms of workers' comp costs. First, let us start with e-mod rates, also known as an experience modifier rate. This multiplier calculates your workers' compensation premiums. How do they factor into your costs? The lower the e-mod is, the higher the reduction you receive. And when you decide to create a co-employment relationship with a Professional Employer Organization, it can provide your company access to their e-mod rates. That means that you end up paying lower premium amounts.
Lower Premiums with Economies of Scale
Professional Employer Organizations use the economies of scale to help them shop for and obtain workers' compensation insurance that provides lower premiums. As a result, these PEOs can negotiate for workers compensation policies with a master plan that includes all the worksite employees for all their clients. And if you partner with a Professional Employer Organization, all the PEO’s clients will have access to this master plan and get the same rates.
Optimize Class Codes
Workers' compensation class codes are codes an insurance company uses to identify the specific categories of work. Depending on your code, you can end up paying a lot of money for workers' compensation. Insurance companies need these class codes to adequately estimate workers' compensation rates for the appropriate level of risk associated with the specific work performed. That is why optimizing these class codes is essential in keeping your workers' comp costs low. And unfortunately, improper code use is very easy to do and happens more often than many people realize, resulting in an expensive mistake for a business. However, with the help of a best-in-class Professional Employer Organization specializing in class code optimization, you will receive the best coverage at the best rates.
Skip Upfront Deposits
Upfront, hefty deposits are always required for workers' compensation insurance. However, when you work with a Professional Employer Organization, you will have access to the PEO's plan, which means they have already taken care of the deposit. This means that workers’ comp insurance is pay-as-you-go.
Fraud Prevention
Fraud can happen anywhere, even when dealing with workers' compensation. That is why it is so vital to track claims with streamlined equipment. Working with a Professional Employer Organization can give you the peace of mind that you need in these situations. Professional Employer Organizations handle the claims management process where they look for and prevent fraud.
Safety Training
A Professional Employer Organization is not going to let one of their client's lousy safety practices raise the workers' comp rates for all the other companies that are part of the Professional Employer Organization. They maintain this level of safety by having a dedicated safety manager, implementing safety improvements, and providing employers with risk management guidance and the worksite safety training programs they need to follow.
The Bottom Line
If you decide to tackle workers’ comp optimization on your own, you may save some money on your workers' comp costs by trying different tactics and negotiations. Yet, you will most likely only have minimal success.
When you partner with a Professional Employer Organization, these in-house savings are often compounded, but you will also obtain access to their lower premiums and e-mods, which results in significant savings for you and your company.
