| What Every Employer MUST Know About Workers | | | | Provide a step-by-step description of the |
| Compensation Insurance. Part 3 of the 6 part series. | | | | manufacturing process. |
| A "How to" Guide | | | | Does the risk provide contract paper services such as |
| My previous article dealt with the alarming fact that a | | | | slitting, sheeting, winding, finishing, laminating, etc.? If yes, |
| large number of organizations have had their | | | | provide a detailed description of these services. List all |
| employees improperly classified for purposes of | | | | equipment used in the risk's manufacturing and/or |
| workers compensation insurance (Workers Comp | | | | processing operations. |
| Misclassifications Can Cost Employers a Fortune). The | | | | As you can see, these are not for the most part "yes" |
| consequence of misclassification could mean that a | | | | or "no" questions and can take quite a bit of time to |
| business unknowingly paid far more in workers | | | | answer. |
| compensation premiums than they should have. Just | | | | Where do I submit the results? |
| think if you found out that your company overpaid and | | | | After gathering all your information, you are now ready |
| could be entitled to a refund? How could use this | | | | to send it to the PCRB. Neither you nor your insurance |
| "found money"? This article will serve as a "How To" | | | | company can just change your code. Your code |
| guide to see if your company has overpaid and | | | | change request must be approved and processed by |
| deserves a refund due to employee misclassification. | | | | the PCRB. There are very specific procedures that |
| How you ultimately spend the money is up to you! | | | | must be followed and are available on the PCRB |
| What information is necessary? | | | | website. |
| The first thing you need to do in order to conduct your | | | | To go back to our paper products manufacturing |
| self audit is to gather lots of documentation. You will | | | | example, let's assume the PCRB determines your |
| need your workers compensation declarations pages, | | | | company should actually be classified as a distributor. |
| audit statements, experience rating worksheets, merit | | | | We'll also assume that the distributor class is less |
| rating worksheets, loss runs, and running totals of | | | | expensive. You can then begin to calculate (using all |
| premiums paid and attributable to workers comp | | | | your assembled worksheets) the amount of your |
| premiums. Unfortunately, you will need this information | | | | refund. Your insurance company will probably be willing |
| for each policy year being audited. I would recommend | | | | to help you do these calculations but I would double |
| auditing at least the previous 5 years worth of data. If | | | | check them anyway. You will also need to determine |
| you find a smoking gun in any of those 5 years, you | | | | the number of years your company has been |
| may wish to audit prior years as well. One error can | | | | misclassified. Obviously, if you changed from a |
| indicate past inaccuracies and can compound the | | | | manufacturer to a distributor 10 years ago, your refund |
| effect of future mistakes. | | | | could be substantial. |
| How do I know if my classification code is right? | | | | So why aren't more organizations doing this? |
| Once you have collected all this information, your work | | | | That's a very good question! For one thing, even |
| really begins. What you must determine is whether or | | | | though a company could get a substantial refund, it can |
| not your organization was properly categorized based | | | | be a big project to handle internally. There is also no |
| upon what it actually did during each policy period in | | | | guarantee that any refund is due. Another reason is |
| question. To make that determination easier (in | | | | because many organizations just assume that all of |
| Pennsylvania), the Pennsylvania Compensation Rating | | | | their information is correct. |
| Bureau (PCRB) has published a set of Standard | | | | How can I learn more? |
| Survey Instructions on its website ( This 85 page | | | | If you would like more information on how to determine |
| survey begins with some general questions about your | | | | whether your organization has been misclassified you |
| organization and then moves into specifics regarding | | | | can contact me using my information listed below. Our |
| your particular industry. For instance, if you are | | | | company is fully equipped to help you perform your |
| questioning whether your business is properly classified | | | | own audit or you can outsource the entire project to |
| as a Paper Products Manufacturer, the following is a | | | | us. |
| list of the industry specific questions you would need | | | | Are there any other places my insurance provider |
| to answer: | | | | may have miscalculated? |
| List, and provide percentages for, the raw materials | | | | Absolutely! That is why my next article will deal with |
| and finished products. | | | | how to ensure your experience mod is correct. An |
| Does the risk manufacture paper/operate a paper | | | | incorrect mod can cost you a bundle as well. |
| mill? | | | | |