TL;DR: Took some safety steps and learned how to talk to the companies and cut my costs quotes from a $30k to $5k.
Before I say anything I have to give props to Phoenix Insurance Group (phoenixinsgroup.com) the owner took the time to sit down with me and answer all my stupid questions and help me figure out what I'm about to share. If you're in Arizona, California, Colorado, Michigan, Nevada, Utah, or Washington hit them up. Tell them Ryan from Tidy Casa sent you so I can get some brownie points. 😃
So.... I recently got a quote for workers comp insurance that was over $30,000 and 50% was due up front... O,o... I just about shit myself...
That quote was more than 10% of what my total payroll was going to be for 2017 (w2 and 1099 included). This seemed crazy!
So I did some research and found out there was a TON of reasons why it was so high. First, I didn't know how to talk to the insurance company and I wasn't taking the proper steps to keep my people safe.
A lot of lessons in here so strap in!
Workers compensation insurance works like this. Risk * payroll = what you pay. The lower the risk and the lower the payroll, the less you spend.
For a standard home service staff (people going out to people's homes) you would expect to pay around 5% of what you pay them. The easiest way to think about it is for every $100 you pay your people, you owe workers compensation insurance $5.
The office staff is different. For me, that worked out to be $0.31 per $100. Other things play in there that I'll get into later.
Now it's important to note I operate in Arizona. Things are pretty business friendly around here. I hear it's more expensive in Cali and other states and if you're in another country... I have literally no idea... Gotta do your own research on that but I'm sure most of the concepts work the same.
Here's what I found out when I dove into why my original quote so high.
Safety: If your teams do ANYTHING that MIGHT be dangers it can greatly increase the cost of your worker's comp insurance.
We used to issue step ladders to our teams. SHORT ones like two steps but through workers comps eye that's a huge risk. They don't care if it's a 20" ladder or a 1" one. Same difference to them.
That difference alone brought my costs from $5 per $100 to $12.50 per $100. So I wrote some safety rules. I guess I'm getting why big companies do that kinda thing.
I put these safety rules on the back of our quality standards checklists. All the teams carry these the insurance companies love that. It shows we're serious about safety and we don't give our teams any excuse for not knowing what they can and can't do. These safety rules include things like, no going outdoors, staying off ladders, and no handling bio-hazards. These all play in and bring the cost down.
Working from home: If your clerical staff work from home it's a higher risk since they're always in the office. So if they're hanging Christmas lights and fall off that ladder. They technically got hurt at the office. :/ Sucks I know but from all the people I talked to this is a real thing.
To combat this you have to register their homes as your offices and say you have multiple locations. Not that they work from home.
Contractors: Contractors are not exempt! Sucks right? With that, insurance expects you to cover them.
The deal is, even if they're contractors and are required to have their own insurance you're insurance company isn't stupid. They know contractors are small businesses (smaller than yours) and they probably don't have coverage.
Without coverage, when you send someone out there, they can come after your insurance if they get hurt on the job.
So with that, the best options for covering contractors (cheapest for you and them) is to work with sole proprietors. I know we've all been told LLC are the best but... not in this case... Sole proprietors don't have to cover themselves since they're the owners of their business. Which brings me to my next point... neither do you!
Covering yourself: Don't include yourself in the coverage. They'll ask if you want to but don't... It doesn't make sense.
If you get hurt on the job it's going to be a lot easier to justify keeping you on the payroll... it's your business after all. PLUS you probably have the highest salary... chop that off the top and don't include yourself.
So.. after taking all these into account, not including myself in coverage, taking the proper safety steps, not having clerical people that work from "home", and requiring contractors sign documents saying they will get their own insurance I talked with the people at Phoenix Insurance Group and they helped me get my original quote from 30k to 5k!
Paying for Coverage: Another thing to note, a lot of companies require you to pay the full year of coverage up front. Obviously, this can be expensive and hurts cash flow. 5% of payroll all at once is hard for any company. Especially if you're just getting off the ground.
Most companies should be able to finance the purchase. They will typically require about 20% up front then you can make other payments throughout the year. This is a must if cash flow is important to you...it should be anyway.
If the company can't finance the insurance, find another company who can.
Joining Larger Groups: I've recently found a number of companies like ADP and Insperity can be a great option too. These companies require you to run payroll through them but doing so you can get added to their large group rates for health insurance, workers comp, and employee life.
I recently got a quote from Insperity and while there's a fee for running the payroll and everything else it would cut my costs for works comp down to 2.38%. Still playing with the numbers to see if this pays off. I'll update once I know. :)
Conclusion: When it comes to buying insurance it pays to know what the companies are looking for. Doing a little homework can pay. 😃
Let me know if you were able to save any money on your worker's comp because of this post, or if there's a tip I should add. :)
Email me at [email protected]