Controlling Costs in Workers’ Compensation

Every business owner knows that keeping costs down in any area possible is essential to the growth of his or her business.  Wasting money and resources is never a good business practice, and it is crucial that any business owner stay on the alert for ways to reduce waste and costs.  The area of workers’ compensation is no exception to this rule.  Clearly the employer should not be looking for ways to get out of paying appropriate workers’ compensation claims, but there are legitimate and important other methods to help keep the cost of workers’ compensation down.

First, a well-thought out safety plan and program will help keep the employees from sustaining work-related injuries at all.  Employers should make sure that the employees have a good understanding of all safety procedures and protocols in the work place.  Creating a safety committee and changing the safety procedures on a regular basis to reflect changes in the industry or in the work place will also help reduce these costs.

Second, in the event an employee does sustain work-related injuries, the employer should take any available action to help that employee return to work as soon as possible.  Even though it is possible to have others fill in for the injured employee or even hire a temporary worker to fill the injured employee’s position while he or she recovers, this ultimately will probably cost the employer more money.  The employee has the expertise and contacts necessary to complete his or her job in a more efficient and straight-forward manner than a temporary worker who will have to be trained.  An employer should stay in close contact with the medical professionals and its workers’ compensation insurance company during the flow of the workers’ compensation case to make sure that the employer is taking any available steps to help get the employee back to work.

Finally, an employer should be open and honest with the workers’ compensation insurance company.  Being less than honest about the number of employees or nature of the work performed may cut costs on the front end, but when the insurance company discovers the deception, it can cost the employer much more than the original cost of insurance would have been.  Moreover, if the employer has an open discussion with the insurer about safety measures that are being taken, there is sometimes a possibility that such programs could help lower workers’ compensation insurance costs.

Ensuring compliance with workers’ compensation standards is essential for any business, but it does not have to bankrupt the company. Contact me today at (714) 516-8188 to talk about your business and what needs to be done.

Do I Have Alternatives to Carrying Workers’ Compensation Insurance?

Workers’ Compensation is a vast and often complex system. The goal of the entire set of laws is to protect both the employees and the employer. When an employee sustains a work-related injury, the workers’ compensation system provides a method by which the employee may receive payments for medical treatment and for disability payments and also by which the employer may be insulated from a costly law suit. To make sure the employees receive the compensation that they need following such an injury, California law requires that employers carry workers’ compensation insurance. Some employers find this requirement burdensome, and frequently ask whether there are any alternatives to carrying workers’ compensation insurance. It is first essential to understand that the California requirement to carry insurance is strict, and failure to abide by its provisions can result in both civil and criminal penalties. That being said, there are some limited situations in which an employer may have some alternatives to carrying workers’ compensation insurance.
One alternative to using a traditional insurance company is for an employer to purchase insurance through the State Compensation Fund. This may be an appropriate and essential alternative for those employers engaged in a high-risk business. Such high-risk businesses may be turned away from traditional insurance agencies, or the premiums may simply be too high. For an employer with this problem, seeking options from the State Compensation Fund may be the answer. State Fund is required to offer coverage to any business, although the cost may be higher than an Employer would find with another Insurance Company.
Some employers may also choose the option of being self-insured. To become self-insured, an employer must first apply to the Office of Self-Insurance Plans for approval. The OSIP will evaluate the application and the business for financial strength and stability, the proposed benefit delivery system, and whether the business is suitable to participate in self-insurance. The financial requirements are that there must be $5 million in shareholder equity, an average net profit of $500,000 per year for each of the last five years, and certified, independently audited financial statements must be provided to verify these claims. If the company has affiliates or subsidiaries, each of those must file its own application to become self-insured.
There are some limited circumstances in which an employer may not have to cover certain workers under workers’ compensation insurance at all. These exceptions would apply to independent contractors or certain types of board members in closely held corporations. Before assuming that these exceptions apply to your business, however, you need to consult an attorney.
California requirements to carry workers’ compensation insurance are strict and the penalties are harsh. Before making these decisions for your business, you need to consult an experienced attorney. Contact me today at (714) 516-8188 to more thoroughly review the requirements for your business.

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