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While safety programs are imperative, contractors are looking beyond safety to reduce workers’ compensation costs by maintaining a reduced permanent workforce and supplementing it with skilled contract labor as the workload increases.

All states generally require employers to carry workers’ compensation insurance to provide benefits to workers who are injured on the job or made sick due to a workplace exposure. With construction being among the most dangerous of all industries, this insurance is critical.

It provides financial protection to the employee in the form of medical and lost wage benefits after a workplace injury is sustained. These benefits can be critical to an injured employee who is temporarily, or even permanently, unable to perform his pre-injury job duties.

Additionally, workers’ compensation benefits are generally an injured worker’s only remedy for the medical costs incurred and the resulting lost wages. This “exclusive remedy” provision precludes an employee who is injured on the job from filing what could be a financially devastating tort suit against his employer. The benefits (remedy) are defined and limited by a particular state’s workers’ compensation statutes. Employers that violate state law by not carrying workers’ compensation insurance may have to defend against a lawsuit and most likely will be subject to fines and possibly even criminal prosecution.

While both employers and employees generally agree that workers’ compensation insurance carries mutual benefits, the challenge to construction contractors of all sizes is to keep the costs to a minimum. For the businesses that carry a zero dollar per-claim deductible on their policy, this means keeping insurance premiums as low as possible, and preventing them from rising once claims are filed.

 Want more info on minimizing your workers' comp exposure? Check out this video!
A fundamental goal of most employers is to send their employees home each day as healthy as when they woke up that morning. Accordingly, many companies invest in the development and implementation of an ongoing health and safety program. Most programs include some form of safety training, such as an OSHA 10- or 30-hour course, as well as ongoing communication via toolbox talks and the distribution of safety literature. These programs typically reinforce the importance of practicing safe behavior and consistently using personal protective equipment.

When managed closely, a robust safety program will predictably increase employees’ safe behavior, and quite possibly have a spillover effect on other contractors on the jobsite. The residual benefit of sending employees home injury-free is clear: Fewer accidents mean fewer claims and lower workers’ compensation insurance premiums and related costs.

Contractors also are turning to staffing companies that provide skilled craft professionals as a way to control their workers’ compensation costs. Essentially, contractors are now maintaining a smaller permanent employee base. As their workload increases beyond the capacity of the reduced permanent workforce, many are choosing to use skilled craft professionals supplied by a staffing firm to meet the workload demand rather than adding employees to their own permanent staff. Because these “contract” workers remain statutory employees of the staffing firm, the contractor meets its increased workload demand without having to boost direct payroll costs. And because workers’ compensation insurance premiums are based on payroll dollars, the contractor avoids the premium cost on the incremental labor needed to meet the work demand. Those costs are absorbed by the staffing firm.

Because the staffing firm covers these employees under their insurance, injuries sustained by contract employees do not increase a contractor’s experience modification rate (EMR), which influences insurance premium rates. Maintaining a low EMR is critical to keeping premium costs down. Many contractors using staffing firms have seen their premium costs decline because of a reduction in their EMR resulting from a permanent workforce with only the most skilled, tenured and safe employees.

While businesses that purchase a policy that carries a zero dollar per-claim deductible only have to be concerned with the cost of their insurance premiums, those that assume increased risk by carrying a per-claim deductible in exchange for a lower premium rate face additional costs. These costs come in the form of medical, lost wage and other benefits provided for under workers’ compensation statutes.

Indemnity or wage-impairment benefits. All states require lost wage benefits to be paid to injured workers who cannot perform their job after a work-related injury. In many states, an employer may be required to provide lifetime benefits to permanently impaired workers who cannot return to their pre-injury job.

Medical bills. Most states require employers to provide their injured employees with lifetime medical coverage for work-related injuries and any subsequent conditions. An employer also must reimburse an injured employee for the cost of traveling to and from medical appointments associated with the injury. Some states even require employers to compensate family members who help care for an injured employee’s daily needs. 

Retraining and vocational assistance benefits. In many states, an employer is required to provide retraining benefits to employees who cannot return to their pre-injury job. This may include paying for the injured employee to complete his GED, college courses or other forms of education and retraining for a new profession, as well as vocational counseling and job placement services.

In addition to direct benefit payments to the injured worker, an employer may incur legal fees and court costs to defend a workers’ compensation claim and other ancillary costs such as claim investigation expenses and independent medical exams.

While contractors cannot fully insulate themselves from all of these costs, running their businesses with fewer permanent employees by partnering with a staffing company may significantly reduce their risk or exposure on jobsites and yield substantial savings.

Take Note
Contractors must document all recordable workplace injuries in their OSHA 300 logs, including injuries to their permanent workers and injuries to contract employees who are under their day-to-day supervision. While contract employees are covered under the staffing company’s workers’ compensation insurance policy, OSHA holds the supervising contractor responsible for ensuring the safety of all construction personnel on the jobsite, whether it be permanent workers or craft professionals from a staffing firm.

Ron Rowen is vice president of risk management for Tradesmen International. For more information, visit www.tradesmeninternational.com.

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