Do you need workers’ comp for part-time employees?
Workers’ compensation insurance can account for a large portion of your expenses as a business owner, so it’s natural to look for ways to reduce these costs.
Could a part-time workforce be the answer?
Workers’ Compensation Requirements
Workers’ comp requirement can vary by state, industry, and even the size/ structure of your business.
But, in most states, workers’ comp is required even for part-time employees.
Here’s what workers’ comp requirements look like across a sampling of states:
- Arizona: Mandatory for any business that hires or employees at least one employee, no matter the type (part-time, full-time, etc.)
- California: All employers, even those with just one employee, must carry coverage.
- Colorado: All employers with one or more full- or part-time employees must carry coverage. Some exceptions exist.
- Connecticut: All employees with one or more full- or part-time employees.
- Illinois: Required for nearly all work situations and employers, even with one part-time employee.
- Ohio: All employers with one or more employees must carry coverage.
- Oregon: Employers with one or more employees must carry workers’ comp insurance.
- Texas: Workers compensation coverage is optional for all employers.
- Utah: All employers are required to carry coverage for employees, including directors, officers, and LLC members.
- Vermont: All employers with one or more full- or part-time employees must carry coverage.
- Washington: All employers with one or more employees must carry workers’ comp.
With very few exceptions, workers’ comp insurance is required in nearly every state if you have a minimum of one employee, whether that employee works full-time or part-time.
“How Do I Lower My Workers’ Compensation Costs?”
So you can’t lower your workers’ comp costs by reducing your workforce from full-time to part-time.
Short of moving your business to Texas (one of the few states where workers’ comp coverage is optional) how can you lower your comp costs?
1. Make Safety a Priority
Does your workplace have a safety-focused culture?
Safety is the #1 way to reduce workers’ compensation costs.
A safer workplace can reduce direct costs, such as insurance premiums, as well as indirect costs, such as the cost of hiring, retraining, overtime, and loss of productivity that comes along with workplace injuries.
Studies suggest that every $1 invested in workplace safety results in $3 - $10 in cost savings (direct and indirect) for employers.
Simply telling workers to “be safe” isn’t enough. To keep your workers safe and your premium costs down, workplace safety needs to be ingrained in your company culture and embraced by everyone from the top execs on down.
2. Accurately Classify Jobs
Job code classifications play a big factor in your workers’ compensation rates, so make sure you’re not overpaying due to a misclassification.
In construction, agriculture, and staffing services, numerous employee codes can be assigned to various individual employees. This added layer of complexity can easily lead to misclassification errors… and higher than needed comp rates.
Even in industries where all employees share one business type classification code, there’s still room for error. Your outside sales team, for example, may need a different code than your clerical team.
Have a workers’ compensation professional review your codes with you to avoid potentially costly errors.
3. Review Open Claims and MOD Factors
Are you keeping track of what has been paid out on employee injuries versus what’s being reported to the rating bureaus?
Follow up with your insurance provider to ensure there are no errors or miscommunications that could result in higher premiums for your business. Check on claims to be sure open cases get closed and that claim reserves aren’t unnecessarily high.
Don’t assume that your experience modification factor (EMF) is correct. Your EMF is the primary driver of your workers’ comp rates, so do your diligence in ensuring it’s accurate.
Your MOD is a reflection of three years’ worth of data, including (but not limited to) claim data, job classification data, and payroll data. Review your MOD with your insurance agent and be sure yours accurately reflects your business’ history, industry, and data.
4. Hire Wisely
You can affect workers’ compensation costs by hiring wisely.
Responsible workers who are diligent about workplace safety are likely to have fewer workplace injuries than workers who are laissez-faire about safety practices.
Make safety practices a part of the interview process. Including safety discussions during the interview process solidifies your “culture of safety” from day 1.
Before you hire a new employee, be sure to do your due diligence.
A solid pre-employment screening process can do more than verify a new hires’ aptitude to do the job. You can perform criminal background checks and verify professional references
Drug and alcohol abuse could lead to injuries in the workplace. In most states, it’s perfectly legal to require pre-employment drug screening.
5. Take Care of Employees
One of the simplest ways to reduce workers’ comp rates is also the kindest.
Take care of your employees.
Creating a culture of safety and working diligently to prevent injuries is only half of the battle.
Injuries happen. What are your policies and practices for when one does?
Provide proper care when an employee is injured.
- Deal with injuries seriously and immediately.
- Make sure your employees know to report an injury immediately to an employer or supervisor.
- Document the incident properly and be sure the employee gets the appropriate care.
Build a strong “back to work” program.
- Invest in your employee’s continued employment.
- Find appropriate activities that an injured employee can perform.
- Work together to identify ways the employee can fill needs within the organization while they’re recovering.
Back to work programs make employees feel valued, help them recover faster, and save companies the indirect costs of hiring and training new workers.
Workers’ compensation rates don’t have to be out of your control.
Sure, some industries will have higher risks - and higher rates - than others. But you can lower your rates by reducing the number and severity of injuries that happen at your workplace. Talk to your insurance professional to find more suggestions on creating a safer workplace for all of your employees: full - and part-time alike.