Any business that employs others is required by state law to carry a valid workers' compensation insurance policy. This type of insurance is meant to provide financial assistance to an employee injured at work. While many of the factors used to calculate your company's workers' compensation insurance premiums are outside of your control, there are some things that you can do to be proactive in minimizing your premium costs over time.
1. Implement Mandatory Safety Training
Since workers' compensation is designed to offer support in the event of an employee injury, finding ways to reduce the potential for injury can be a simple way to reduce your insurance premiums.
Many workers' compensation insurance providers will give companies a premium discount for implementing a formal safety training program. It's important that you work closely with your insurance provider to determine which safety training programs meet the qualifications required to receive a discount.
Having all of your employees engage in regular training will help you lower the amount you pay for your workers' compensation insurance coverage in the future.
2. Exercise an Owner Exemption
The owner of a business has the right to opt out of providing workers' compensation insurance coverage for him or herself. Commonly referred to as an owner exemption, removing a business owner from the list of covered individuals can help reduce insurance premiums.
One element that is used by insurance underwriters to determine the cost of a workers' compensation insurance policy is the total payroll paid out to covered individuals. Eliminating the owner typically reduces a company's total payroll significantly.
Lowering the total payroll through an owner exemption will result in lower monthly premiums for your workers' compensation insurance coverage.
3. Rely on Payroll Reporting
If your business closely monitors its cash flow, choosing to rely on payroll reporting when paying your workers' compensation premiums could be beneficial.
Payroll reporting allows a company to report its actual payroll amount to an insurance provider on a monthly basis. The premiums associated with that company's workers' compensation policy are calculated using the reported payroll amount. When your premiums are based on an estimated payroll number, the total paid will have to be adjusted at the end of the year to account for the actual payroll totals for your company.
Payroll reporting eliminates potential overpayments, allowing you to keep that money in your company's bank account to help bolster your cash flow. To learn more about workers' compensation, contact an insurance company.