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10 ways to reduce workers' compensation costs

November 23, 2010
Insurance premiums for workers' compensation are escalating in most states at double-digit rates. Still, insurance companies are losing money and even going out of business with alarming frequency. Injured employees often receive inadequate benefits, while attorneys, doctors and other service providers are apt to profit. An employer's unemployment tax rate can vary between .06 percent and 6.8 percent of each employee's first $9,000 of earnings. The average unemployment tax rate among Illinois employers is 3.1 percent, or $249 annually. Dealers can follow 10 steps to keep workers' compensation costs under control. See it as a variable cost, and address what are the real high costs. Many dealers wrongly consider workers' comp to be a fixed cost; it is not. A dealer can greatly affect workers' comp expenditures by managing the variables involved. Two primary factors drive workers' comp costs: the number and frequency of claims, and the costs of those claims when they are filed. Focus on those key leverage points. Set the right tone. Adopt a companywide "we care" attitude. Foster a culture that treats people with dignity and respect, ensures employees get proper medical care when injured, and helps them to get healthy and back to work as quickly as possible. At the same time, make it clear that system abuses will not be tolerated. Hire smart. Every new employee represents a potential liability. Minimize exposure by using the hiring process to confirm employees can physically perform the job. Filter out potential abusers of the system. Commit to safety. Make safety a core value, not just a slogan on the wall. Create a comprehensive safety program built around employee involvement and hold people accountable for meeting all dealership safety standards. Train supervisors and workers to perform safely in the work environment, and hold managers and supervisors accountable for enforcing all safety procedures. Use qualified workers' comp medical specialists. Establish policies and procedures so injured workers go only to pre-qualified medical specialists, not to the emergency room. Handle claims quickly and properly. Report all injuries within 24 hours. Make sure medical providers and third party administrators follow up in a timely manner. Implement a quick return-towork program. The surest way to reduce long-term payouts is to get workers back on the job as soon as possible. If necessary, use a transitional work program until the injured employee can return to his regular job. Review claims regularly. Meet with a broker or third party administrator- monthly, quarterly or every six months, depending on the number of claims-to review the claims, analyze loss history and devise strategies to minimize costs. Demand more from the broker or third party administrator. Cutting workers' comp costs involves more than getting the lowest premium. Find a broker and administrator who will participate at every step to set up and manage a complete workers' comp system.