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Worker's Compensation Premiums Too High? - How a Staffing Agency Can Help!

If your business suffers from high, unpredictable worker’s compensation premiums, you may want to consider hiring a staffing services company.  Staffing companies offer several advantages over traditional hiring practices, such as specialized training, temporary labor, and often reduced worker’s compensation premiums.  Today we will discuss how you can reduce your worker’s compensation premium by hiring a staffing company.

  • Worker’s Compensation Rates May Be Lower

Worker’s compensation premiums are based generally on worker classifications, payroll, and the number of claims made by the employer.  All businesses carrying worker’s compensation insurance have a rating known as an experience modification factor, which is essentially a ratio of number of hours worked to number of claims made.  A low experience modification factor, also known as the EMF, usually results in lower premiums, while a higher experience modification factor will usually result in a higher premium.  Hiring a staffing company can allow a smaller business to, in effect, take advantage of the staffing company's low EMF and lower their premium while maintaining complete coverage. 

Businesses with just a few skilled workers can see a skewed modification factor when a claim is made.  For example, if a company with ten employees has one claim, the resulting experience modification factor would be higher than a company with fifty employees making two claims.  This high number of employees is one advantage staffing companies can have over smaller businesses when it comes to worker’s compensation premiums.

Staffing companies may bill out hundreds of hours for every one hour a smaller company might.  This is one reason why staffing companies spend much of their time and resources on safety training and careful vetting of clients to ensure they provide a safe working environment.  This strategy often results in fewer worker’s compensation claims, which in turn lowers the experience modification factor of the staffing company.

  • Worker’s Compensation Premiums Can Be Unpredictable

Traditionally, worker’s compensation premiums are calculated based on the previous year’s premium.  In most instances, a portion of the total previous year’s premium is paid upfront, and the balance is either refunded or billed at a later time, based on an actual audit of the work performed.  For businesses whose market is cyclical, this can mean paying a worker’s compensation premium in advance, based on hours that were never actually worked.  This difference is refunded when the policy is renewed, but the practice can tie up working capital with no return on investment.  

  • Staffing Companies Reduce the Upfront Expense

Staffing companies typically include the cost of the worker’s compensation premium in the hourly rate.  For the client, this often makes planning and investment activities easier, as the premiums are paid while the employee is generating revenue.  Instead of making a capital outlay when the worker’s compensation premium is due, this method allows the business owner to pay as they go via monthly invoices from the staffing company, often resulting in a more manageable expense. 

If you’d like to learn more about how our construction staffing agency can help your bottom line, request a quote today!