Workers’ compensation coverage is a vital tool that provides payments to employees who are injured on the job while also protecting your business from litigation.
When you secure workers’ compensation insurance for your company and its employees, you’re asked to assign a code to each position you employ. That code, in part, determines the compensation rate for that job in relation to the amount of risk involved in performing the activities related to that job.
For instance, an employee involved in acid manufacturing should be coded 4829, but 4825 is the code for making licorice extract. These are not job positions you want to get mixed up. Moreover, your workers’ compensation insurance provider is going to want to know which of these jobs is being performed by your employees—candy flavoring or corrosive chemicals—in order to accurately calculate your coverage.
The National Council on Compensation Insurance (NCCI), funded primarily by insurance companies, establishes and maintains these codes as a way to provide consistent classification and loss information from state to state. However, not all states use the NCCI codes, and many if not most states have customized the NCCI codes for their own uses. (If you’re in Texas, acid manufacturing is actually coded 4815.) It’s important you’re using the code system that applies to your state. (For a complete list of class codes by state and more information on class codes and how insurance providers use them, visit the Class Codes website here.)
You can work with your PEO or your insurance provider to get your workers coded accurately from the get-go. Those classifications will become the foundation of your workers’ compensation plan.
Important side note here: One of your primary goals in this aspect of business management should be to build a relationship with your workers’ compensation insurance provider, or the PEO that’s handling it for you. It’s a vital professional partnership that can generate efficiency and solvency in your operations while mitigating the significant risks involved in being held responsible for your employees’ welfare.
If you are up front about all aspects of your operations, your insurance provider or your PEO should be able to tell you what codes apply to your employees. HOWEVER, it’s important for you as business owner to take ultimate responsibility for the codes. If you believe your employees and their jobs have been misclassified, you should request an audit from the National Association of Insurance Commissioners. As always, accuracy is the ultimate goal. If you’re found to have mis-classified workers, you may get dropped from your provider, making it that much harder to get new coverage. Ignorance is never a defense.
Every job has its physical risks. Employees want to know that they’ll be financially compensated if they’re injured on the job, while business owners want to be able to provide for their employees without risking the entire venture to costly litigation, and insurance companies, of course, want to know what kind of risks they’re insuring. Workers’ compensation, when drawn from accurate job coding, keeps everyone safe.
Download Howard Leasing’s Workers’ Comp Injury Packet here. If you have any questions, please give us a call!