Human Resource Department – Workers Compensation Experience Rating, Classification and Premium an Employer Pays

When we think of  Human Resources we naturally think of things like hiring, firing, vacation days, sick days, retirement and benefit packages. But we probably don’t think of the role a human resource department may play in controlling an employers workers compensation costs. Let’s talk a bit about the relationship between human resource, experience rating and workers compensation premium.

Here’s a short list of typical activities you may find in a human resource department and their impact on an employers workers compensation program:

  • Claims – Worker injuries are typically managed by or through an employers human resource department. This function may include gathering initial workers compensation claim information and making the first report of injury to the insurance company. The HR Department may also be responsible for designing and implementing any RTW or Return To Work program that an employer uses.
  • Employee Classification and Payroll – Correct classification and assignment of payroll makes a big impact on workers compensation experience rating and it’s the HR Department who is usually the contact point for this information. Proper treatment of overtime and correct reporting of employees by class code and payroll for audit purposes often rest on the door steps of the HR Department.
  • Safety – Reduction of work place accidents along with employee education and enforcement of company safety rules and regulations are often found as HR Department responsibilities.   

What can an HR Department do to help control workers compensation premium? To begin, HR must gain an understanding of the rating elements that go into developing workers compensation premium. The items mentioned above, employee classification and payroll assignment, claims and safety all fall right into their laps. Think about it. HR is probably responsible for developing job descriptions in their organization and job descriptions, while not exactly the same, can be closely related to workers compensation classification code descriptions. Each class code has its own rate per 100 of payroll so correct class code assignment and payroll application for each employee will affect premium. HR typically deals with injured workers, time away from work and employee assimilation back into the workforce. Safety, then, is just a natural fit with HR, after all it has to do with employees right?

HR should gain a working knowledge of the relationship between workers compensation claims and experience rating, or EMR, as applied to the employers premium. In its basic form, experience rating appears simple, just something that has to do with claims. But in its detail there are many individual rating elements that work together to develop an employers EMR factor, a factor that when uncontrolled and not understood can have devastating effect on the premium an employer pays.

A recap! HR should understand the relationship between safety efforts, claim control, proper classification, experience rating and their effect on premium. This understanding can be acquired by:

  • Working closely with their insurance agent or broker;
  • Working closely with their insurance company safety department;
  • Assigning specific contacts within their HR Department to monitor claims and work with claim adjusters;
  • Establishing a working relationship with an outside workers compensation consulting firm for assistance with experience rating, classification, audit and payroll assignment issues.

Hope this helps you out! Thanks for reading!