Every business needs to manage risk—the chance that things can go wrong and create conditions which can cause injury, damage or loss.

While the U.S. Department of Labor's Occupational Safety & Health Administration (OSHA) reports that worker occupational injuries, illnesses and fatalities have shown a multi-year downward trend, unfortunately those positive results are not spread equally across employers of all sizes.

A key research study compiled for the U.S. Small Business Administration* (SBA) says that small businesses are generating more workers' compensation claims payments than larger businesses. The study also indicates that "the burden of workers' compensation is greater for small business than for larger business…" when insurance premium payments are related to the bottom line. Translation: workers' comp premiums are taking a disproportionate toll on small business profits.

Certainly none of this is a big surprise if you are among the small business owners who just opened your latest workers' compensation insurance premium notice. Rates are up and for many businesses they've been on a steady rise. However, the good news is workers' comp costs, to a certain extent, are a controllable business expense.

Start a Loss Control Program. If You Already Have One, Keep Improving It.

One area that you can influence to secure lower insurance rates is your company's work environment. Many small businesses elect to do that through a loss control program. This type of program enables them to systematically identify and address conditions that could lead to expensive workers' comp claims and higher premiums.

The heart of the loss control plan for many businesses is an effective safety program. The program should establish safety guidelines and procedures for your employees to follow to minimize workplace injuries and to respond to emergencies. "A safety program is an expression to the insurance company that management is genuinely interested in controlling losses," explains Don Henriques, Strategic/Alliance Partner Manager for The Hartford. "An effective safety program also says to the employees of a business that management is genuinely interested in their safety."

Some tips for developing an effective safety program:

• Conduct a safety audit to identify the strengths and weaknesses of your current efforts to promote a safe work environment.
• Involve your managers and employees in a proactive effort to keep your work environment safe.
• Seek expert assistance from your insurance company, OSHA and the SBA.
• Establish procedures to prevent workplace injuries and what to do in the event of an accident.
• Stay actively involved to ensure your company's program remains compliant with the most current safety regulations.

Multiple Factors Impact Workers' Comp Insurance Rates

There is no single cause, culprit or condition for high workers' comp premiums. Conversely there is no "silver bullet" remedy. As a matter of fact, a complex set of factors, over which you may have little or no control, helps to shape your insurance coverage payments. These include:

Your Location. State laws, not federal statutes, primarily shape workers' comp. So, the state in which your business is located can have a definite bearing on what you pay for coverage.

Your Industry. If your operations employ manufacturing machinery, heavy equipment or motor vehicles—all of which can increase the potential for significant bodily injury—expect insurance underwriters to assign a higher risk to your business than they would to a marketing or design firm in a climate-controlled office.

Medical Expenses. Treatment for work-related injuries is caught up in the same inflationary spiral with all other healthcare costs and will continue to be a factor in calculating workers' comp premiums.

By putting a loss control program in place, however, you can help offset some of the impact of these factors that you can't fully control.

Look to Your Insurance Agent for Guidance

If you need help, start by calling your insurance agent, notes Henriques. "An effective agent can help you identify risks, make corrections, guide you to experts and arrange insurance protection that fits your specific needs." Insurance company Web sites provide a wealth of ready information and some insurers even give clients the ability to speak one-on-one with experts on special hotlines.

For example, small business payroll clients of ADP have access to an additional avenue of assistance. ADP Insurance Services is the ADP business division that offers the Pay-by-Pay Program for Workers' Compensation. In addition, the business has licensed insurance agents who can refer clients to loss control resources provided by the federal government or private carriers.

Pay-by-Pay is an effective way to manage the workers' comp process. With Pay-by-Pay, premiums are based on actual payroll, accuracy is increased and the administrative worries of calculating premiums on your own are eliminated. Furthermore, clients find that the program helps improve their cash flow, since large up-front deposits are eliminated. Instead, premium payments are made over the entire payroll cycle.

While there's a general consensus that loss control programs are a logical gateway to fewer workers' comp injuries and lower insurance premiums, the solution in reality is a never-ending journey, demanding constant vigilance. But it's a trip that every small business should be willing to take.

For more information on the Pay-by-Pay Program, please call 1-866-851-3375 or browse online at www.sbs.adp.com/products.

Source:
Kathleen McMinn, Sr. Director, Marketing ADP Insurance Services (Kathleen_McMinn@adp.com, 1-866-851-3375)

All insurance products and/or insurance services are offered and sold only through the licensed agents of Automatic Data Processing Insurance Agency, Inc. or its licensed insurance partners. Certain services may not be available in all states.

* Research Summary 155 (United States Small Business Administration, Office of Advocacy): "Worker's Compensation by State…by Business Size," Joel Popkin and Company, 1995.