Costly Coverage Traps
There are three common issues you need to be aware of:
1. Require a certificate of insurance for workers' compensation from all contract labor or casual labor, making sure that active owners have not excluded themselves from coverage. Contract labor or casual labor workers who don't have workers' compensation insurance fall under your workers' compensation policy. You will need to report the amount paid to those workers as payroll for workers' compensation purposes. If not reported, a premium charge will be made during an audit of this exposure.
2. If your business undertakes a new enterprise that is not common or normal to the company's business operations, your workers' compensation carrier must be notified prior to the time these changes become effective. Changes in business operations can affect the rates at which your policy was written. If your carrier was not notified of such changes and they are discovered during an audit, those changes will be considered and the premiums for that exposure will be changed accordingly.
3. A workers' compensation policy earns premium as long as it is in force. If coverage is no longer needed, you must cancel your policy in writing.
Money saving Premium Audit Tips
The Timbermen Fund is continually striving to help policyholders pay the lowest premium possible. Below we've highlighted some areas where you may be able to save money on workers' compensation:
Overtime
Be sure records reflect overtime in dollars, hours and total by employee per pay period. When overtime is recorded separately, a portion can be excluded from payroll for workers' compensation purposes. If overtime pay is separated and the rate is time and a half, then 1/3 of the overtime pay is deductible. If you pay double time, the deduction is 1/2 of the overtime pay.
Bonuses and Tax Sheltering Plans
Have written contracts and proper documentation of employee bonus and tax sheltering plan contributions (e.g., 401Ks, cafeteria plans).
Executive Officers
Include executive officer payroll and duty descriptions with payroll records because in some cases, the officer can be excluded from state workers' compensation.
Certificates of Insurance
If you hire contractors or subcontractors, obtain their certificates of insurance for workers' compensation coverage. If you cannot provide such certificates, you are responsible for their insurance and will be billed accordingly.
Additional Tips to Help an Audit Flow Smoothly
* Have detailed explanations of each employee's duties.
* Have a responsible financial officer or representative accessible during and after the audit to meet and discuss the results. This will eliminate confusion and allow any problems to be easily and quickly addressed.
SECOND INJURY FUND
Reduce your liability exposure on pre-existing worker related injuries by completing the Second Injury Fund Questionnaire on all employees, including owners, managers, etc.
The Second Injury Fund is a law (LA-R.S.23:1297) that encourages hiring of people with prior injuries or that have a pre-existing disability or illness. A pre-existing disability or illness does not have to be related to a prior workers' compensation claim. All workers' comp providers pay into this state fund. If an employee is injured while working and the injury is related to a prior injury or illness, then under certain conditions, the state will help by paying part of the workers' compensation benefits. In order for employers to apply for Second Injury Fund reimbursement, they must show that they had prior knowledge of an employee's condition(s).
After each employee completes the second injury fund questionnaire, a supervisor, who has the authority to hire or fire, witnesses the employee's signature, and then files these forms in the personnel file. This file should be made available to our safety inspectors upon request. The only form you return to us is the "Second Injury Fund Compliance Sheet." You may mail it to us or fax it to 318-628-6630.
PART-TIME EMPLOYMENT
By Louisiana law, employees who are injured receive compensation based on a minimum of forty (40) hours unless they are classified as part-time employees. This means that part-time employees can sometimes receive as much or more income while receiving workers’ compensation benefits as they would earn if they return to work. This scenario not only reduces the built-in incentive to return to work but also increases the cost to the insurer/employer.
Louisiana law defines part-time employee in this way: “Part-time employee” means an employee who, as a condition of his hiring, knowingly accepts employment that (a) customarily provides for less than forty hours per work week, and (b) that is classified by the employer as a part-time position.
This form should be filled out and kept in the employee's personnel file. They should not be mailed to us. This is a step you can take to help lower the cost of workers’ compensation insurance.
AGREEMENT FOR COVERAGE BY LOUISIANA LAW
This agreement acknowledges that the rights and remedies between the employee and the employer for any injury or occupational disease shall be solely and exclusively those provided under the Workers' Compensation Law of the State of Louisiana, and that such laws shall apply to any work related injury or occupational disease, regardless of whether the causative employment activities are within or outside of the geographic boundaries of the state of Louisiana.
This agreement is also know as "Other States Coverage". Have each employee sign and date the form and file it in the employee's personnel file.