Workers' compensation can be difficult to understand, and at times it may seem overwhelming. With so many things to navigate, you might consider having a dedicated workers' compensation team on your side, such as Kickstand Insurance.
There are a few mistakes you will want to avoid when it comes to workers' compensation and managing your team. Failure to do so can cause a mess with documentation and issues with your audit when it comes due. Continue reading to find out more.
Employers must have workers' compensation insurance; in fact, it is required by law in every state once you have a minimum number of employees. While it may be obvious that you must carry insurance that covers all employees, things can become complicated if your company also uses independent contractors, often known as 1099 contractors.
You could feel at ease ignoring independent contractors when it comes to your workers' compensation insurance policy because they aren't your company's actual employees. That's not the greatest idea, and if you unintentionally leave someone off the policy, which should be protected, you could be setting yourself up for a large bill at audit.
The best solution is to only hire subs that carry their own WC insurance and provide you with Certificates of Insurance showing their coverage before work begins.
It's crucial to avoid underestimating or overestimating the anticipated annual payroll. Any change in expected payroll at the start of the insurance period may result in an increased premium being required at your audit because the workers' compensation premium is directly based on payroll. This is frequently a sizable additional amount that is owed and surprises the employer.
Although creating accurate payroll forecasts from the start of the policy period may seem challenging, you’ll save yourself a headache in the long run. Both underestimates and overestimates, excluding your 1099 contractors, result in undesirable circumstances and frustration.
Record keeping is vital when it comes to your payroll documentation. Especially payroll records that might be used for a workers' compensation claim. There are a few common mistakes that are usually made within this category that, if not made, would result in fewer fines and less stress.
Payroll Separation: If workers' compensation laws permit payroll separation for your company's activities, you have to maintain accurate payroll records that reflect the actual hours each employee worked according to their classification code.
Improper Use of Classification Codes: Workers' compensation audit issues are frequently caused by the interpretation of classification codes and the assignment of personnel to such codes. An employer could inadvertently assign a code to certain work processes observed in their daily operations, only to discover a correction during an audit.
Use of Subcontractors: Another frequent cause of audit errors and mistakes involving correct documentation is subcontractors. It is crucial to keep accurate records if you utilize subs.
General Payroll Records: Payroll records should display a breakdown by the employee for things like benefits, retirement contributions, overtime, sick time, and vacation time, along with any bonuses that were given out and any per diem or travel expenses that were incurred. All payroll records should be able to be verified with the appropriate tax documentation.
Cash Disbursements: Be cautious in these cases because your audit will undoubtedly find and include cash payments made to day workers and other service providers. These transactions must be properly documented.
This is a call or meeting or job site visit where a safety engineer discusses safety and risk management. A third party typically conducts it. At these site visits, the safety engineer will provide you with recommendations that you should implement based on their findings. Not doing so may result in trouble down the line.
Many managers may ignore the findings of this visit because they do not realize this is part of their contract with the workers' insurance company. It is imperative to pay attention to emails or calls you might get as they are only obligated to reach out a few times and ignoring them can jeopardize your policy. The visits typically occur after binding a policy.
Not all policies require this visit, but some do. Pay attention to make sure you not only understand the meaning of the visit but take the necessary steps to fix what is suggested. Also of note, audits are completed by a third party and will occur a few weeks after the policy expires.
Business owners normally need to fill out documentation with their state's regulatory body and pay a processing fee in order to be eligible for a workers' compensation exemption. The application process varies from state to state, but it usually involves a basic set of questions about the nature of your business and the number of employees you have.
In some states, the process takes just a few minutes, while others can take several weeks or longer. Once you've completed the necessary paperwork and paid your fees, you'll receive an exemption certificate that will allow you to stop paying workers' comp premiums until your next renewal date for the specific employees you completed the form for, such as the owner. Letting your exemption expire can result in additional premium due.
If you don't comply with the insurance company's audit, your policy may be canceled, or the present policy may not be renewed. You may also receive a financial penalty from the insurance company. This amount varies per state. In addition, your premium could go up by 20–50 percent.
Although audits can induce stress, following through with your responsibilities is important. As long as you pay attention to the mistakes above and fight past them, you should make it through your audits in good shape.
Working with a reputable workers' compensation insurance company is key to helping ensure you don't make any of these costly mistakes. The team at Kickstand Insurance is here to support you. If you're looking for workers’ comp insurance, you’ve come to the right place!
Get your online quote immediately and we’ll follow up with some additional questions so we can get a written policy for you to review. Reach out with any questions you might have. We can’t wait to work with you!