Workers’ Compensation Cost Drivers in the Staffing Industry

Workers’ Compensation Cost Drivers in the Staffing Industry

For firms in the staffing industry, trying to calculate their workers’ compensation premium can be confusing and stressful. From trying to figure out how many employees are on their roll at any given time to job classification of these employees, a workers’ compensation cost for a staffing firm can fluctuate or just be hard to nail down.

In most cases, the temporary staffing agency is responsible for the workers’ compensation insurance — like from Monarch Partners — that’s given to workers, as the workers themselves are considered an employee of that agency, not the client.

Let’s look at some of the reasons why cost can be an issue in workers’ compensation in the staffing industry.

Misclassifying Employees

This is an ongoing issue in the staffing industry in terms of having a consistent price set in workers’ compensation insurance. The classification code system for workers’ compensation premiums does not consider the temporary staffing agency when calculating for premiums. Misclassification of employee job codes and incorrectly reporting of payroll present confusion and problems for workers’ compensation companies.

Some workers’ compensation insurance companies who work with staffing agencies have created a pay as you go program, like Monarch Partners, which allows temporary staffing firms to adjust their premiums on a monthly or quarterly basis, based on actual payroll information.

Captives

Premiums for workers’ compensation plans used to put a major weight on staffing agencies, forcing some out of business. In some cases, the workers’ compensation cost for temporary staffing firms is one of the largest expenses.

When it comes to covering captives, staffing agencies usually set up their own to self-insure their workers’ compensation claims with the benefit of re-insurance. This is done with the goal of putting a limit on their total loss exposure.

Smaller firms have tried out other captive insurance programs in their effort to cut down on their overall workers’ comp costs. Temporary staffing agencies with claim records that are less than stellar are usually made to assign state pools or risk plans.

Cutting Down on Workers’ Compensation Costs

There are a number of steps staffing agencies can take in order to do away with the cost drivers mentioned above and reduce the overall cost of workers’ compensation premiums.

First, staffing agencies can refuse potential clients involved in more dangerous or hazardous work, such as construction or more physically laborious roles. These positions, such as carpenters, electricians, and general contractors, face potentially dangerous risks every day, driving up the cost of insurance.

Next, staffing agencies can install an effective return-to-work program. These programs allow the agency to place the employees who do get injured in some way to get back to work at a different client who can work with their work restrictions. For instance, if a contractor can’t do the majority of the physical parts of their job, but still has the know-how to complete more managerial tasks, there could be an opening for them available.

Also, staffing agencies can opt for proper vetting and screening of employees that they place with their business clients. The screening process should include actions like drug testing, thorough background checks, and prior injury history. Doing this can help weed out those who are not fit enough in some capacity to take care of the tasks a specific job asks for.

Staffing agencies should know that they will experience periods of fluctuation in costs, which can make it difficult for them to get an effective workers’ compensation plan. At Monarch Partners, however, we work with our clients to customize the right plan for them based off their needs. Get in contact with us today to see how can find the best solution to your workers’ compensation needs.

About Monarch Partners Group, LLC

For more than 30 years, Monarch Partners Group (MPG) and affiliate Nationwide Employer Services LLC have focused on providing Workers’ Compensation insurance solutions for distressed risks and industries. Our long-term history and expertise in the space and market sources enable us to find solutions for business owners and brokers that they may otherwise not have access to. Our success is reflected in the $900 million in payroll in our programs. We write Workers’ Compensation coverage for all types of risks in all states with solutions that include the Standard Markets, Administration Service Organization (ASO), Professional Employer Organization (PEO), Employer Of Record (EOR) and Captive Insurance programs. For more information, give us a call today at (855) 435-5153.

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