by Rebecca Shafer, J.D.
Imagine trying to calculate your workers’ compensation premium when you do not know the number of employees you will have at any one time or their job classifications. That’s life for the temporary staffing agencies – in their own peculiar world when it comes to workers’ compensation. Temporary staffing agencies often have a difficult time obtaining and maintaining workers’ compensation insurance. In most jurisdictions, the temporary staffing agency is responsible for the workers’ compensation insurance as the worker is considered an employee of the temporary staffing agency, not an employee of the client. While the broker for the temporary staffing agency can meet with an employer to get an estimate of the numbers and types of positions the agency may fill, it is only an estimate, or sometimes a” shot in the dark.”
Misclassification of Employees Is Ongoing Problem The workers’ comp premium classification code system did not have the temporary staffing agency in mind when the system for calculating workers’ comp premiums was created. Misclassification of employee job codes and under-reporting of payroll is an on-going problem for workers’ compensation insurance companies. The workers’ compensation premium audit is definitely necessary at the end of every policy year to get an accurate premium. Some workers’ compensation insurance companies who do insure temporary staffing agencies take the process a step further. They created what is referred to as “pay as you go program” where the temporary staffing agencies workers’ comp insurance premiums are adjusted monthly or quarterly based on actual payroll data. Captives or Assigned Risk Pools National staffing companies in the temporary staffing agency business set-up their own captives to self-insure their workers’ comp claims with the benefit of re-insurance to cap their total loss exposure. Smaller temporary staffing companies have joined “rent-a-captive” insurance programs in their effort to reduce their workers’ comp cost. Temporary staffing agencies with poor claim records (and some with not so bad of claim history) are forced into assigned risk plans or state pools. In the past workers’ compensation premiums were such a big burden for temporary staffing agencies, some agencies were forced out of business. (For many temporary staffing agencies, the workers’ comp insurance premium is their second-largest expense after payroll.) These were the staffing agencies who did not try to control their workers’ comp losses or who did a poor job screening potential employees. 8 Steps For Staffing Agency to Reduce Workers Comp Costs All temporary staffing agencies regardless of size can take certain steps to reduce overall workers’ comp cost.
1. Proper vetting and screening of employees:
you place with your clients. The screening process includes drug testing, background checks, and prior injury history.
2. Refusing potential clients:
involved in hazardous or dangerous work.
3. Testing and verifying:
the skill sets of employees before they are placed with an employer as improperly or inadequately trained employees are much more prone to injury.
4. Verifying the employee has the proper safety equipment
and protective gear, or the client has the equipment and gear necessary and will provide it to the employee.
5. Training the staff
of each placement office on proper and timely reporting of workers’ comp claims.
6. Have a workers’ comp claim coordinator
who actively follows up on a regular basis with any employee who is off work.
7. Have a return-to-work program
allowing you to place the employees who do get injured back to work at a different client who can accommodate any work restrictions.
8. Have an insurance broker
who is familiar with the temporary staffing agency business and who can place your company with more than one workers’ compensation insurance company. Temporary staffing agencies can expect to experience periods of fluctuation making it difficult for them to obtain workers’ compensation insurance. The best way to protect your business profits and to be able to purchase future insurance coverage is to actively manage your workers’ comp insurance program now to reduce the number of claims.
For all of your Staffing Agency Insurance needs, call us at The Huttenlocher Group! (248) 681-2100
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