5 Ways Contractors Can Lower Workers Compensation Costs

By Remmie Butchko, CIC

Georgetown Insurance Service, Inc.

Silver Spring, MD

Insurance costs have always been top a concern for Contractors of all trades. Insurance costs are usually a “top 5” expense up with payroll, material cost, vehicle expenses, etc.

We frequently see several areas where money can be saved with a few quick-fixes. Sometimes these changes can be as simple as recordkeeping and paperwork reporting procedures.   Here are 5 examples, in no particular order of importance:

  1. Keep separate payroll records for premises and field work. Most contractors have some staff that spend zero or very limited time in the field. This can include mechanics, yard employees, and ancillary fabrication shops. If separate payroll records are not maintained, these employees will be lumped-in with the field labor. If payroll records reflect the labor division, the on-premises employees can often enjoy a lower Workers Compensation rate. The rates tend to be lower because yard or shop employees are not subject to worksite hazards.
  2. Keep separate payroll records by jurisdiction. It used to be that everyone was afraid of paying DC Workers Compensation rates. Over the past few years, DC has become the most favorable rating state for many trades in comparison to Maryland and Virginia. By separating the payroll, you can often enjoy a lower Workers Compensation rate for DC labor.
  3. Apply for the Construction Credit Premium Adjustment Program (CCPAP – currently in MD and VA only).   This program was originally designed to “level the playing field” on Workers Compensation costs between Union and Non-Union contractors by providing discounts based on the amount of a Contractor’s Average Hourly Wage. The higher the Average Hourly Wage, the higher the credit amount.   Because of the growing prevalence of jobs requiring payment of Davis-Bacon Scale Wages (aka Prevailing Wage), it is not uncommon to see Non-Union contractors qualify for CCPAP Credits.
  4. Drug Free Workplaces receive a 5% credit from most insurers in Virginia and Maryland. In order to qualify for the credit, a comprehensive Drug Testing Program must include testing (a) pre-hire, (b) post-accident, (c) random (frequency varies by employee count), and (d) reasonable suspicion.   This is not always an easy step. Once we saw a company lose 30% of their workforce in less than a week following the implementation of a comprehensive Drug & Alcohol Program. On the positive side, they saw a 40% drop in their Experience Modification over the next 4-years.
  5. Invest in PPE (Personal Protective Equipment), train employees on proper use of PPE, and then enforce its use. Eye protection, hearing protection, gloves, proper footwear and hardhats should be non-optional. Over half of the Workers Compensation injuries that we see could have been prevented by proper use of PPE in the shop or field.

Hopefully reading this article has been a worthwhile investment of your time, and if it (a) saves you a few dollars or (b) prevents even a single workplace injury, I will consider it to be a valuable investment of mine!


Disclaimer: All data, information, and opinions provided on this article, newsletter, or blog is for informational and educational purposes only. While every caution has been taken to provide readers with the most accurate information and honest analysis, please use individual discretion before making any decisions based on the information in this article, newsletter, or blog. Georgetown Insurance Service, Inc. is not responsible if its readers happen to experience loss, injury, or damage resulting from its display or use. All information is provided on an as-is basis. This article, newsletter, or blog does not represent the thoughts, intentions, plans, or strategies of any specific Insurance Carrier, Georgetown Insurance Service, Inc. partner or affiliate.
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