Workers Comp Big Premium Increases – Inadvertent Way To Cause
The inadvertent way that for an employer you can increase your Workers Compensation premium.
I have seen a situation happen very often in a recession that can cost an employer a large amount of workers comp premium dollars, especially at the yearly payroll audit. This is very prevalent in California now.
In a recession, most companies start to cross-train or lay off employees. This causes employees to do job tasks that they might not usually do in a normal economy. If your company is in this situation, please be very careful not to assign an employee to a job duty that would cause a great increase in premium.
For example, if an administrative or clerical worker is given a very small job to help clean tools, that employee’s workers comp classification code may change from a low-risk job (clerical) to a higher-risk job (mechanic).
Even if the employee only cleans tools for one-half hour per week, the insurance carrier auditor will move the employee from the lower class code to the higher one, which can increase the premiums you pay for that employee up to 5,000%. We have seen this recently in quite a few of the audits in the down economy.
As I heard at an NCCI conference, if the employee performs the high-risk job only for a few minutes a week, they should be classified in the higher class code without a doubt.
Bottom Line – make sure the workers compensation insurance carrier premium auditor knows exactly the job duties of all employees and back up your job classification with documented job duties. This may be time-consuming in the short term. In the long term, it will be well worth the documentation effort to avoid the inadvertent way to increase premiums.
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