6 Keys to Keeping Workers Compensation Costs Low(er) for Your Nonprofit

Don’t you wish workers compensation would just take care of itself?

It’s a pain. I know it is. But I’m here for you and will walk you through some workers comp purchasing tips for nonprofits.

Photo Credit: attorney_nj via Compfight cc

Photo Credit: attorney_nj via Compfight cc

Here are some keys to establishing your coverage in such a way to give you the best chance to lower your costs over time (note that your definition of ‘low cost’ might not be realistic compared to the options available in the nonprofit workers comp marketplace).

1. Start Early

Technically, your state’s laws will tell you what the legal requirements for workers compensation. Often, states have an employee count trigger. In Georgia, if you have three or more employees, you are required to have workers compensation.

But let’s put the legal requirement on the back burner.

As it relates to costs, if you take out coverage earlier in the life of your nonprofit, you establish your workers compensation experience when your risks are relatively low and your payroll is lower. This workers compensation experience is vital to qualifying you for the best workers comp markets as you move forward.

Too often, a nonprofit will have been active for over 5-10 years and finally decide to take out the coverage. Most insurance companies look unfavorably on this scenario, and depending on the type of risk, might refuse coverage. In this situation, the only option is a state’s assigned risk pool. The ‘pool’ is the most expensive option and can be a huge budgetary hit if the nonprofit’s payrolls are getting up there. If, on the other hand, the nonprofit purchases coverage in the first year or two of existence, when the payroll is low or even nonexistent, that nonprofit (assuming good claim history) will qualify for the best options.

2. Create Safety Policies

When you connect with  your agent, ask for any resources she might have to help you create safety protocols and procedures.

A few resources that could help you with developing your safety policies:

  • (Sorry for the obvious nature of this one)… Google “Safety policies + [your type of nonprofit]: For example, Google “Safety policies and procedures for after school programs”. You just might find some resources or another, larger, well-established after school program that might send you some information.
  • Ask Friendly Competitors: If you’re in the nonprofit space, I’m guessing you’re in a network specific to your niche. Ask the others in your network. One of my colleagues is working with an adaptive climbing organization  that helps folks with various physical limitations experience rock climbing. They surveyed various climbing groups around the country and compiled their own tailored plan.
  • Use Insurance Applications: Insurance applications are wonderful risk management resources. They are filled with questions that will clue you in on risk management and safety best practices. You won’t even need to be Sherlock Holmes to figure it out.
  • Hire a Professional Risk Manager: There might be a time when you will want to hire a safety expert to give you ideas and audit your policies and procedures.
  • Use Your Insurance Company’s Resources: Many insurance policies are pretty much boiler plates. Therefore, insurance companies attempt to differentiate themselves by offering risk management webinars and consultations. Avail yourself of these resources. Note that even your general liability carrier’s resources can help inform your workers comp safety procedures.
  • Appeal to a Membership Association: If you’re CARF certified, you have to have your house in order, right? if you are a member of another association, seek out any resources that association has available.
  • You’re in the trenches…. you tell me: Put a comment below about how you developed your nonprofit’s safety procedures.

3. Adhere to Your Safety Policies

Install regular training around the importance of your safety policies.  More than likely you have regular meetings

Maintain standard rewards and consequences. If you have a rule against texting and driving, make it extremely easy for your drivers not to text and drive… and create consequences if they do.

Building a culture of care means caring enough to encourage safety among your employees.

4. Pay on Time

One of the kisses of death is bad or slow pay. As much as carriers don’t like to offer terms to organizations who wait 5-10 years into the life of the nonprofit before purchasing coverage, they also are nervous about pay problems.

First of all, pay issues are a drain on the insurance company’s resources (not to mention on the insurance agency’s resources).

Secondly and more importantly, companies equate irresponsibility in one area to irresponsibility in other areas. While it might not always be fair, insurance companies get nervous if they see a pattern of poor pay habits. If you have a clean payment history, then you are a much, much more attractive client and would qualify more easily for any available discounts (not a guarantee, but more likely).

5. Take Advantage of Drug-Free Credits

Research your state for drug free workplace credits. In Georgia, you can get a 7.5% discount if you pass the test.

6. Have a Clear Division of Roles

This suggestion is more art than science. The social service class codes for workers compensation are often all-encompassing. For instance, if you’re a group home or residential facility, your determining class code would be 8842. The code includes drivers, professionals, teachers, house-parents, etc. That said, if you have a dedicated office or even, if your company is merciful, dedicated office space within your main facility, you might be able to get administrative and clerical only employees classified in the 8810 class code for clerical employees (a much less expensive option).

Companies might not allow this segmentation, but it doesn’t hurt to give it a shot. Don’t lie about what your employees do, but be clear and perhaps you might catch a break.

To Sum It All Up

These keys will help you, over time, keep your costs down, relatively speaking. I’ve heard many reasons and excuses nonprofits have for dragging their feet with workers comp, but hopefully you understand why the coverage is so important.

Insurance markets come and go. For example, my agency has added two new workers compensation carriers for nonprofits in the past year.

If you get coverage early, maintain your policies and procedures, pay well, avail yourself of any drug-free or other credits, and keep clear divisions of roles, you will set yourself up to qualify for the best insurance markets as they become available.

Also, you’ll be honoring your commitment to care and extending it not only to the clients or community you serve but also to the employees who help you get the work done.

**Please note that my agency is licensed in most U.S. states. If you’ve struggled with finding coverage, please use the buttons to reach out or email me at brett@hains.com for help. 

In the comments below…

What questions or concerns do you have about workers compensation coverage? 

 

 

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