Post-Pandemic Payroll Effect – Payroll Decreases + Accident Rate Stays The Same
One of the most popular questions we have received since early last year (2023) concerns the spike in Experience Mods also known as E-Mods or X-Mods. One of the most common factors that J&L has seen over the last few years is the post-pandemic payroll effect. Yes, I coined that term this morning.
Many business owners and risk managers have contacted us since early 2023 asking how their E-Mod or X-Mod spiked in such a short period of two years or less.
Post-Pandemic Payroll Effect- Why?
Our first step begins with a loss run analysis looking back at least 4 years. What we have seen is the number of accidents and reserves seems to be a constant figure. Many businesses are building back their business operations. The payrolls may have not been what they were pre-pandemic.
If the number of accidents is the same even though payrolls have understandably decreased, there is not enough payroll to cover the risk. A 20% decrease in payroll will result in an increase in risk for an employer having the same number of accidents. The post-pandemic payroll effect kicks in and the frustration also spikes along with the Mod.
The Workers Comp Experience rating system is a delayed system that takes time to show up in an employer’s experience rating. It may take a few to many years for the X-Mod to stabilize.
How Do We Fix It ASAP?
The best method is to cover these steps:
- Full loss run analysis for the last five years. Why five – predictive analytics have stretched out the period that underwriters examine when writing or renewing an account.
- Experience Rating Sheets Analysis – go back in time the same five years as the loss runs
- Claims and Reserve Review – recommended if questions arise when doing the first two steps
- Explore other options – Captives, PEOs, self-insurance, large deductible, safety consultants. If you are told “This is your only option”, heavily question that statement.
If you have any general questions on the post-pandemic payroll effect, send us a note through our Contact Us page. If you want to attempt a DIY, then feel free to use the search box to search for the four steps in the 2,000 articles on this website.
