Virtually every company in the U.S. with employees is required to have a workers compensation insurance policy intended to insure workers against injuries on the job. Workers’ compensation programs are intended to compensate workers when injured at the workplace without having to undergo lengthy and expense litigation, but unfortunately these programs too often fall victim to the law of unintended consequences.
Many employers feel that the law complicates their lives. The costs are seen as burdensome and a drain on their profits. Moreover, litigation has only changed course – not been stopped. For staffing agencies, workers compensation is even more complex, requiring extensive and accurate record keeping. To control the costs of workers compensation, and minimize the associated administrative burden, start by understanding how workers compensation rates are established. There are three factors that drive worker’s compensation costs:
While the base rate is fixed, companies can take steps to control the base premium and the MOD rate.
Workers’ compensation guidelines for temporary staffing agencies are the same as if the staff were permanent, except when it comes to paying insurance premiums. The temporary staffing industry is responsible for ensuring that each employee it sends on a job is covered with the correct amount of workers’ compensation insurance based upon the job being completed.
The burden of maintaining accurate records is more complex for staffing agencies. Accurate records must be kept of where the contract worker conducted the assignment, the kind of work done, the amount of hours completed and the rate of pay. This information is important for setting the premium rates for the workers’ compensation insurance. Records must include the employee’s name, Social Security information, job title, date hired, termination date, compensation type (such as salary, hourly or commission), payroll deductions, gross pay and job classification.
Workers’ compensation premiums for temporary staffing agencies continually change, based upon the number of workers in a given period and the number of hours they worked. This requires reporting the hours worked for all employees, including those paid on a salary basis. Job requisitions (a.k.a. job orders) must tie back to the number of employees on temporary assignment to ensure accurate workers’ compensation coverage. A worker order should include pay rate information, job start date, job classification and the number of employers the agency is to provide.
Temporary workers hired through staffing agencies generally are considered to be employed by both the agency and company, even though the agency pays the salary. This means that the responsibility for establishing a safe work environment is shared by the staffing agency providing the worker and the client at which the individual is on assignment.
When sourcing temporary workers through staffing agencies, companies should require that they be named as an insured under the staffing company’s workers’ compensation policy. This entitles the company to the same level of immunities from civil litigation as the staffing company under the Workers Compensation Act.
Workers’ compensation rates are typically one of the highest variables in determining bill rates, so companies should work closely with their staffing agencies to control these costs. Close partnerships between companies and their suppliers of temporary workers have proven to reduce costs, eliminate safety risks, and provide a safe work environment for all workers.
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