Workers’ compensation gives employees benefits and remunerations for any injury, illness, or accidents that happen during the course of fulfilling their duties and responsibilities related to their employment. It covers the medical expenses and costs of the employee. It also compensates the workers on the income and pay lost due to work-related injury or illness. Other benefits include disability benefits, death benefits, and employee rehabilitation.
Inaccurate Payroll Estimations
Overestimating and underestimating payrolls are two common mistakes which an employer can make while determining workers’ compensation benefits for employees. Inaccurate estimations of the projected annual payroll may cause drastic changes in premium. Underestimating will lead to an increase in the premium, whereas overestimation will cause the employer to pay much more than is required to cover the incident. Though the premiums are refunded to the employer during the yearly premium audit, the effect of such overestimation is quite negative. This is because the amount so refunded represents the money that stayed with the company throughout the financial year instead of being invested in more profitable ventures. Therefore, it is very important to be accurate and precise when predicting and compiling the annual payroll of an employee.
Unverifiable Workers’ Compensation Insurance
In a company or within a business, assigning work to subcontractors and independent contractors is quite common. However, before these third parties begin to provide their services, they must present proof, evidence, and verification of their workers’ compensation insurance. Although the subcontractor is tasked with delivering the workers’ compensation insurance for their workers, the main contractor must ensure that the subcontractor has made coverage available for all the workers. Lack of evidence of their insurance during the yearly premium audit could put the business at risk of being charged for negligence.
Improper Handling of Workers’ Compensation Claims
When an employer handles the claims of their workers poorly, there will be an increase in the cost of workers’ compensation insurance. It isn’t possible to automatically measure or check the number of claims mismanaged and the cost resulting from such mismanagement. However, a system called experience modification (MOD) is used to measure claims and evaluate their management.
This system measures the company’s claim experience through a numerical representation based on how a company can be likened to another company within the same industry with similarly categorized employees. The average MOD is positioned at 1.00. This number, however, changes per employee depending on the number and severity of accidents experienced.
Every business must ensure that its employees are properly provided for under the workers’ compensation insurance policy. For more information and guidance, contact First Insurance Solutions today. We are ready to assist you with all your business insurance needs.