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3 Best Ways to Reduce Worker Compensation Costs

3 Best Ways to Reduce Worker Compensation Costs

Consider this, in 2011 workers comp benefits payments totaled over $60 billion, yet the total cost to employers was just 1.27% of that amount thanks to insurance coverage. If you have any employees other than yourself, you shouldn’t be without workers compensation insurance.

In states like California, businesses are required to have workers comp coverage. But even if your state doesn’t have a mandate, you should have coverage from the array of workers comp scenarios to protect workers from exorbitant hospital bills and your owners from potentially bankrupting legal claims.

Workers Comp Insurance Doesn’t Have To Be Costly

While workers comp is an essentially unavoidable expense for your business, it doesn’t have to be expensive! There are many small tips you can use – like checking employee references when making a new hire: Are you asking if your potentially new employee has had any repeated on-the-job injuries? Are you regularly spot checking your employees for unsafe work habits or signs of a safety risk?

There are also big ways to save on costs, but insurance rates may not necessarily be one of them. Most workers compensation insurance rates are set by the state, and are determined by the class of business. To really save on costs, you should read through the following and learn our 3 best ways to reduce workers compensation costs.

1. Create a Safe Work Environment For Employees

Creating a safe work environment can save you the most money by reducing employee on-the-job injury. It also reduces the amount of time employees spend off work due to job-related injuries.

Instruct your employees in proper workplace safety. This includes proper safety equipment and tool usage, as well as a thoroughly documented training process.

Reduce hazards in the workplace. Use a workplace safety checklist, and reduce or remove any hazards that result in workplace injury as soon as possible to avoid further injury.

A good place to start looking for information on creating a safer work environment is through the California Department of Public Health. This site has a wealth of information and links to resources that can help you get and stay compliant with state and federal laws, OSHA guidelines and more.

Another good place to find out more information about your specific industry would be to contact the local or state chapter of the association for your field of business (for instance, the Roofing Contractors Association of California). Most association websites include safety information or ways to contact them for more information. Some insurance carriers provide information and guidelines on workplace safety too.

2. Re-evaluate Your Rates

While rates are set by the state, rates differ heavily based on employee classification. It could save you a lot of money to make sure your business is correctly rated! Here are some questions you should ask:

  • Are the employee classifications on your policy correct?
  • Do they cover your true scope of work?
  • Are you getting the best rates possible?

Most workers compensation rates are determined by the state, though some insurance carriers can file their own rates with the state. These rates vary by class of business and by job description. It is best to review your classifications with your insurance broker to make sure your business is properly classified.

Typically the rate for an office worker is significantly less than the rate for a ditch digger since the type and severity of an on-the-job injury varies greatly between these jobs.

Rates can also be affected by your experience modification factor. This factor is determined by looking at your business’s last three years of workers compensation claims. The experience modification factor is determined by the National Council on Compensation Insurance (NCCI) and is based on claims information provided by your insurance carrier. If you have had a few small or even no claims, the factor may be 1.0 or less. If you have had many small claims or even some large ones, the factor will be more than 1.0. This factor is applied to your rate and can increase or decrease it significantly.

If you have experience a few small claims with small payouts, a deductible plan may be right for your business. This increases your out-of-pocket expense in the event of a minor employee injury, but reduces both your policy premium and even the impact on your experience modification factor. You should absolutely check with a Hayes Broker to see if a deductible plan might be a better fit for you.

3. Focus On Getting Your Workers Back To Work Quickly After A Claim

Provide prompt medical attention to an injured employee. Delayed medical attention may result in complications, increasing the claim payments which causes increases in policy premiums. Companies with the highest premiums typically have the lengthiest average duration of missed time per workers comp claim.

Focus on doing everything you can to get your injured employee back to work quickly, but also safely. The longer an employee is off work, the more the claim will cost. Many states have Return to Work programs that can help you determine when and how it is right to put injured employees back on the job.


In conclusion, there are a lot of ways to reduce workers compensation costs for your business. If you’d like help prioritizing the solutions that will generate the biggest cost savings, call Hayes Brokers today. We are your partner in business and will be happy to provide policy reviewed safety information and checklists that can help you reduce your workers compensation premiums.

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