Workers’ compensation, love it or hate it, is the law of the land in New York and many other states. And for many it is a hate relationship either due to the cost, or they just don’t truly understand how it works.
So, let me start by saying we should show some love for workers’ comp, because as a business owner, it is our first line of defense when one of our employees get injured on the job and offers some piece of mind to both the employee and employer. While the coverage does not ensure that business owners will not get sued for negligence, there is a certain amount of relief knowing that there is a policy in place.
Now to cracking the code…Many people know that workers’ comp is underwritten by the New York State Insurance Fund & private insurance companies, all under the oversight of the New York Workers Compensation Board and the New York Department of Financial Services. Delve a little deeper, and you’ll learn all contracts or policies are underwritten on a variety of guidelines but for the basis of this article we will focus on the classification code—aka business type—and those classifications all have codes set by the carrier and state and, along with payroll figures in determining rates for employers.
Speaking from experience, I have seen numerous times where an employer says “I want to do it all” and just goes and purchases a policy from the state and does the annual audit themselves. I have also dealt with business owners who want the assistance of an insurance professional but neglect coordinating with a payroll company and certified public accountant to ensure the process is done right the first time. Why is knowing these roles important? Because payroll companies and accountants are the ones who usually set up your classifications when you sign up for the bookkeeping or payroll services and having everyone on the same page is a big help when you have your annual audit.
Confused yet? Well, let’s use a restaurant as an example. Their kitchen staff, wait staff, bar staff, office staff, manager, and owners may be covered or not but all may have different workers comp codes and should have different classifications with the payroll company or accountant. What makes this so important is that the codes can be more expensive for certain roles. For example, a Kitchen cook vs a manager, but too often everyone on the staff is lumped into that same high class code, resulting in owners paying more than what’s required. Simply put, business owners would be best suited to pull out their payroll reports and start properly classifying their employees, get their team on board and then see how they can save money when speaking with their insurance carrier or brokers.
In the end, business owners need to take the time to ask the questions and to reach out to their team of advisors when applying for or reviewing their workers’ compensation insurance. The results may mean saving some money, smoother audits and possibly a better understanding of the workers compensation system.
Frank Kolovic is the Owner Tri State Insurance. He can be reached at firstname.lastname@example.org. He is a licensed agent and Broker in NY NJ & CT and the information mentioned is for educational & informative purposes, not used to solicit or sell any products or services. Please reference your policy or carriers for more info about your workers comp coverage’s.