Tips for a smooth premium audit

A workers’ compensation premium audit is a routine and regular process for every policy. In fact, SFM premium auditors complete more than 20,000 of them each year.

Here’s why premium audits are so important, and how to ensure yours goes smoothly, year after year.

Premium audit basics

The annual premium audit helps ensure you end up paying the right amount for your workers’ compensation coverage — not too little, or too much.

The premium you pay for your workers’ compensation coverage is initially an estimate, based on your expected payroll and job classifications. Once the policy period has ended, we audit your actual payroll and classifications to determine your final premium. As a result, you might receive a bill or reimbursement to make up the difference between the estimate and the final audited premium amount.

Depending on your organization’s characteristics, an auditor might visit to complete the premium audit, or you may be able to complete the premium audit online.

The records you’ll want to have on hand for your premium audit include:

  • Your payroll register or journal for the dates your policy is in effect
  • Your quarterly tax reports, including Form 941 and state unemployment forms
  • Departmental labor distribution report for larger employers (this is the money paid to laborers not included in your payroll records)

Certain types of companies may have additional record requirements.

We’ve worked to make the premium audit process as simple as possible. In fact, in recent surveys, 92% of policyholders who had an onsite premium audit rated the experience a 4 out of 5 or higher. Sixty-six percent rated the premium audit experience a 5 out of 5.

Hear more premium audit basics in this short video featuring our Premium Audit Team Leader Ken Johnson: 

 

Subcontractors and your premium

Classifying subcontractors when it comes to workers’ compensation can be confusing.

Workers’ compensation regulations set by your state may define employees and independent contractors differently than the IRS or your state unemployment insurance department. Don’t assume that someone considered an independent contractor for tax purposes is automatically considered one for workers’ compensation purposes.

That’s why our premium auditors examine payments made to people performing labor outside of your payroll. Whenever you’re paying people for labor but they are not included in your workers’ compensation premium, our auditors need to verify that they meet the criteria as independent contractors as defined by your state’s laws.

If you need help determining whether a subcontractor is an independent contractor or employee, don’t hesitate to ask your agent for help. See our post “Are your workers independent contractors or employees?” for more details.

Tips to avoid premium audit surprises

Because your workers’ compensation premium is initially an estimate, based on your expected payroll and job classifications, your audit results may surprise you if your actual payroll and classifications change significantly over the year.

Here are some tips to avoid unwanted surprises in your premium audit:

  • Update your agent if your operations change significantly. For example, your payroll may increase or decrease. Informing your agent of changes can help reduce the chances of large premium differences when the audit is completed.
  • When you hire subcontractors in specific states, you may be liable for their coverage, resulting in additional premium being due.
  • Get a certificate of workers’ compensation insurance from each subcontractor you use. In addition, each state has guidelines or laws in place to determine who qualifies as an employee versus an independent contractor, and it helps to be aware of the rules in your state.

Complete audits on time to avoid an extra charge

When you receive the auditor’s request to schedule your premium audit, don’t delay in starting the process.

Premium audit noncompliance could result in policy cancellation or a hefty charge of up to 200 percent of your estimated annual premium.

The premium audit noncompliance charge is a National Council on Compensation Insurance rule that has been in place on every policy since January 1, 2017. The Minnesota Workers’ Compensation Insurers Association and the Wisconsin Compensation Rating Bureau also adopted the rule.

Please respond to our attempts to complete the premium audit as soon as you can. If you have questions about the premium audit process, we’re here to help! Call your assigned premium auditor or our Premium Audit team at (800) 937-1181. 

Tips to prevent re-injury after return-to-work

When an employee suffers a work injury and is returning to work, first and foremost, make sure the employee understands the importance of working within medical restrictions to avoid re-injury.

Once restrictions have been lifted, there are still things you can do to make sure the employee is not re-injured on the job:

  • Empower the employee to speak up. Ask for feedback about the employee’s comfort level returning to regular duty. If the employee is concerned about re-injury, he or she may not be ready to go back to regular duties.
  • Discuss ways to prevent similar incidents in the future. Talk with the employee about the root cause of the injury, and find ways to eliminate any environmental or behavioral hazards. Don’t take any chances of the same incident happening again.
  • Point out the not-so-obvious. For example, a shoulder injury might limit an employee’s ability to catch himself or herself in a slip-and-fall incident. This kind of thing is surprisingly common. Being injured is an unfamiliar state. With it comes new sensations and limitations employees might not be aware of.
  • Check in with the employee regularly. Doing the same job tasks an employee did before they were injured may aggravate the same issues and cause re-injury. If the injury was due to repetitive stress, returning to the same job is probably not an option.
  • Promote job readiness. Work readiness is important for all workers, not just those who have been re-injured.
    • Encourage employees to stretch before beginning work, if it fits within their medical restrictions. For employees working in a labor-intensive work environment, stretching can help gain flexibility, reduce strains and sprains and enhance overall physical fitness and help avoid re-injury.
    • Make proper lifting techniques a priority.
    • Reinforce wellness and positive life habits. Support awareness and application of proper eating, adequate sleep and regular exercise. Healthy employees are productive employees.

 

Video: Claims representatives talk about their role

Claims representatives spend their days helping injured workers recover and return to work.

We asked a few claims representatives to talk more about their jobs for a recent recruiting video, and they shared how rewarding and, at times, challenging their jobs can be.

They said working closely with team members and other experts, such as in-house doctors, nurses and attorneys, helps them do their best to serve injured workers and employers.

Watch the video below to learn more about how SFM’s claim representatives view their jobs.

Cut down the risk of injury for your new employees

Hiring new employees always comes with certain risks.

Maybe they won’t fit in. Or they’ll decide they didn’t want the job after all.

But have you thought about the risks to them — to their safety?

According to SFM claims data, more than half of workplace injuries involve employees who are in their first five years of employment at their workplace.

Why do new employees get injured?

Recent data shows that as the unemployment rate drops, the number of new workers increases, along with the percentage of claims with less than a year of employee tenure. When unemployment is low, there is a smaller pool of job candidates to choose from, and your new hires might not stick around as long.

New workers can be more susceptible to injury because they often haven’t developed the necessary skills to safely do their work. For those who work in manual labor jobs, they may not have built up the muscle strength, flexibility and endurance needed to complete the jobs.

Additionally, open jobs tend to be the heavier, riskier ones, and so inexperienced workers get their start doing the most challenging work. This can result in fast turnover and injuries. It happens across many different job fields, including manual labor and education.

Rather than having new employees fill the open, difficult jobs, it’s best to start them off slowly. Bring them in to the easiest jobs and then move them to harder jobs once they’ve had time to adapt. Your workers with the most experience have been trained and conditioned to do the more challenging jobs, and so they are less likely to be injured.

Focus on good hiring practices

When you have an open position that you’ve been struggling to fill, it can be tempting to relax some of your hiring practices in order to find someone to fill the job.

But lowering your standards could result in hiring someone who isn’t suited to the job, which increases the likelihood of injuries and employee turnover.

“In my experience, it’s better to endure times when you have positions sitting open and get creative about how you get jobs done, rather than picking someone you know isn’t right,” said SFM Loss Prevention Technical Leader Lee Wendel. “Otherwise, you end up adding people on your staff that you know don’t meet the same standards as the rest of your employees.”

If your experienced employees think you aren’t holding new employees to the same standard, it can affect morale and bring negativity into the workplace, Wendel said. It’s better to have a robust hiring process and stick to it.

When you’re hiring, keep these best practices in mind*:

  • Have a formal application and a current job description that includes the physical requirements of the job.
  • Have multiple people interview the candidate and conduct multiple interviews, including questions about safety.
  • Be thorough when conducting background checks.** Include checking references, verification of education credentials and legal status, pre-employment physicals and drug testing.
  • Keep all documentation following the hire, including application forms, job descriptions and payroll and attendance records.

Once your new hire has been at the job for a few weeks, evaluate the situation and ask yourself if you would hire them again. If not, work backward through your hiring process to see what you can change to avoid the problem in the future.

Make sure prospective hires understand the job

The interview process is often focused around getting to know the job candidate. But once you think you’ve found the right person, it’s important to make sure that individual gets to know all the job duties before accepting the position. The alternative is hiring new employees who aren’t prepared to do the work required because they didn’t know what to expect.

It’s important that employers give prospective employees a realistic view of what the job is.

In some cases, new employees may stop showing up to work after finding they have to perform certain tasks they weren’t expecting and don’t want to do. Or employees who do keep showing up might be more likely to be injured, because they weren’t prepared or were less dedicated to learning the proper procedures than someone who knew what to expect.

“It’s important that employers give prospective employees a realistic view of what the job is,” Wendel said. “Show them someone doing the job while it’s happening, if possible.”

Create an in-depth safety training program

The best way to make sure your new workers avoid injury is to give them proper training.

If you’ve been understaffed, or still are, it can be easy to cut corners on safety training, but it’s important to start safety training on day one so that your new hires know what to expect going forward.

“Think about preparing your employees to work safely in broad terms,” Wendel said. “It’s being familiar with the hazards, it’s being trained for the hazards and it’s knowing how to avoid situations that result in injury.”

Your training program should include the following:

  • Get them familiar with the dangers of the equipment they’re using and the processes they’re performing.
  • Let them know not to expect to perform at the same level as more experienced workers until they’ve accumulated more skill, experience and knowledge.
  • Teach them the best practices right away that they would otherwise learn from experience.
  • Make sure they understand the hazards present in the workplace, including ones that may not be obvious, such as paint vapors, flammable vapors or carbon monoxide.
  • Enforce the use of personal protective equipment and make sure they know how to match the correct equipment with the job they’re performing.
  • Teach them about how their jobs might intersect with others they share space with.

Remember that training isn’t going to all sink in on the first day. You need to periodically revisit safety with your employees to make sure the important pieces stay fresh in their minds.

Pay attention to what causes injuries

Your injury trends might reveal a weak spot in your current safety training. If you notice that a certain type of injury is repeatedly occurring, or if employees with a certain job tend to be injured more often, this could be a clue that something isn’t being covered in training.

SFM claims data shows that workers with less than a year of experience are most likely to receive sprains and strains. This could be a signal that they aren’t getting enough training on safe lifting techniques. Implement weight limits for manual lifting and remind your employees to lift from a position of power: keep the head up, bend at the knees, keep the load close and remember “nose follows toes” to keep from twisting.

Or maybe you need to reevaluate how heavy objects are stored. Keeping them between knee and shoulder height can reduce the risk of back injuries from lifting. There is also equipment that can assist with lifting heavier objects.

Take the time to perform a workplace analysis. When reviewing your previous injury records, use a checklist to make sure you aren’t overlooking any hazards. You can create your own checklist based on what you observe at your workplace, or download SFM’s workplace analysis supervisor checklist from our resource catalog.

Once you’ve identified problem areas, you can implement changes to your safety training program to correct oversights. Seek advice from your contacts at SFM or search the resource catalog.

Comprehensive hiring practices and safety training are more important than ever. Finding and training new hires can be a challenge, but it’s one that pays off.

*This is not intended to serve as legal advice for individual fact-specific legal cases or as a legal basis for your employment practices.

**Some of these items may not be permissible until a conditional offer of employment has been made. Be sure to consult your employment law attorney.

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