4 years ago, America’s Back Office took on a large client that was suffering financially due to a major issue in employment related expenses. The cost to insure their workers’ compensation plan had spiraled completely out of control.
The company employed a lot of workers in light industrial and manufacturing jobs and the pay was generally low to mid-level as it is unskilled labor. The other issue was that those positions experienced a lot of turnover, and as a result, new personnel need to be trained. The turnover of employees led to both overall inefficiency and injuries.
Despite a limited amount of serious injuries, the client found their cost of labor rising in relation to its competitors. Although most companies in their industry pay the same wage, the client was suffering from an elevated workers’ compensation experience modifier. For example, if a company’s modifier increases due to claims activity, it will then make them unable to compete from a labor cost standpoint. The revenue could be the same be between the client and any of its competitors, however, the cost of labor for client would be higher and would put them a serious disadvantage.
The owner of the company we were assisting needed to control the company labor costs, so he started looking at strategies to fix the issues. Admitting that the company needed expertise in this area, America’s Back Office met with the owner and showed him a strategy for controlling the major pain point, the escalating workers’ compensation insurance expense. Our Director of Workers’ Compensation and Risk Management set out to aggressively deal with the situation. What was discovered was that the company was lacking many things lacking in their current business and HR practices that included:
- No effective plan in place to deal with workers’ comp claims.
- No one managing the workers’ comp claims process.
- No safety plan in play.
- No return to work policy.
- No policies or procedures in place in any facet other than acknowledging the claim existed.
By not having polices in place to address the above led to the situation becoming a veritable emergency to keep the company from losing massive profits.
The America’s Back Office Solution
Following our examination, it was discovered that the client had many low-level claims that if left untended, could have easily grow into a massive problem. Here is why. When the employee is injured, a report is taken, and the employee seeks medical attention if necessary. If the injury is serious enough, the claim can spiral on two fronts: (1) the cost of treatment and medical care are very expensive, and (2) a claim indemnity benefit. If the injured employee is off work for 7 consecutive days, on day 8, indemnity benefits start accruing. This means that the employee is due 2/3-3/4 of their post-tax wage for time off work (the amount varies state by state).
This is where having a return to work policy can be invaluable. If the employee can wait until “they feel better,” to return to work then this can cause costs to soar. By installing an aggressive safety plan, the likelihood is much less that injuries will occur. In addition, having a specific post-injury clinic that employees report to helps to avoid accessing care from the doctors who work in lock step with attorneys who handle these cases. Lastly, an aggressive return to work policy has the potential to avoid indemnity benefits from being awarded if the employee can return to work expeditiously. This type of policy helps to control claims and costs, and thus controlling the experience modifier. America’s Back Office instituted all these policies to the client’s business and the results were astounding.
America’s Back Office Recovers Over $1.4 Million in 3 years!!!
By using its vast PEO industry knowledge, America’s Back Office shielded the client from rising costs and an ever-increasing workers’ compensation modifier. When America’s Back Office took over, the client had a modifier of 1.85 (This means the client was funding workers’ compensation at 185% of the manual premium).
After 3 years of being a valued client of America’s Back Office, their mod was reduced to 1.0 and is still trending down. The financial savings of $1.4 million has allowed the client to expand their business in to multiple states. They are currently building their third office in the past 1.5 years and their 3-year projections have the company doubling in size. It is a safe assumption that if America’s Back Office wasn’t asked to assist, the picture would be much different for the client.
By allowing the experts at America’s Back Office to deal with this major HR cost driving issue, the client could focus on their core competency and drive growth by 100% over the next 3 years.
Is There This Type of Savings for You Too?
Perhaps. We won’t know until we talk and begin to help you like we did with the client above. Take the first step and contact us today for a free consultation or call (586) 997-3377.
To learn more about the rules for work compensation your business, see our article on “The Definitive Guide to Workers Compensation”.