Ever wonder why auditors ask questions and conduct an interview while they are completing a workers compensation audit? If you answered to uncover errors and gaps in classification you would be correct! You’ll be surprised how easy is it for an outside salesperson to move from code 8742 into a much higher rated governing classification code. In this blog we will take a look at how this happens.
Determining the proper classification for an employee can be like balancing on the edge of a tall building. One step can mean the difference between safety or peril. A seemingly simple act can cause your employee to be classed into the higher premium rate class. It’s that line, that very fine line that so many employers are kept in the dark about that gets crossed. Most of the time the employer has no idea the line even exists let alone given any warning about the consequences of paying much higher workers compensation premiums.
Here’s how easy it is to have your sales staff moved into a higher code.
In this example lets say we have an employer who installs siding, garage doors, door openers, gutters and soffit. Sometimes this work is performed on existing residential or commercial structures and sometimes it’s performed on new construction projects. The employer has several sales people who are classed, for workers compensation purposes, as outside sales, code 8742. The job of the sales staff is to call on existing clients, firm up existing relationships, prospect and develop new clients for the business. They are paid on a commission basis and are compensated well for their activities with a total annual payroll of the entire staff running $200,000. A new auditor makes a visit to the employers place of business to conduct the annual workers compensation audit. While conducting the audit interview the auditor discovers the employer has an outside sales staff and asks the employer this question: “Do your sales people ever deliver products to your clients when they are making a sales call?” The employer states: “Yes. Once in a while they will deliver garage door parts or openers. Since they are already going out to visit the client we do this to save on shipping.” The auditor makes notes and leaves with all the information they need to complete their work.
Next thing you know the employer receives a large unexpected audit billing from the insurance company. They discover that the entire $200,000 payroll for outside sales, code 8742 previously carrying a rate of .75/100 with a premium of $1,500, has been moved into a code carrying a rate of $15/100 of payroll, developing a premium of $30,000!
Would that get your attention?
Ok, as always, keep in mind this is just an example and the details of each case are what really counts. This situation may or may not apply to your business. But the concept is correct.
You see, when the employer allowed his sales staff to deliver products, they crossed that thin line from one code into another. The employer had no idea that delivering a product could have had such an effect. What could they do after the audit? Not much. You must keep in mind that the audit is a gathering of factual information for a time period already past. You can’t change the past or the actions of the sales staff that has already occurred. However going forward, armed with the knowledge now out in the open, the employer can restructure activities and not allow his sales staff to deliver products. Nice to know now, but a little late don’t you think?
It can be that simple. An activity that an employer sees as a cost saving function turns into a workers compensation nightmare!
Hope this helps you out and thanks for reading!