Workers’ compensation, on average, costs about 1% of your total payroll
according to a 2021 report from the National Academy of Social Insurance. While that might not seem like a lot, it can add up quickly.

The amount that your business pays toward workers’ comp is determined by your total payroll, the type of work your employees do (and the risk associated with that work), and your history of past claims. Within that, employers can take a proactive approach to keep their costs in check. Here’s how.

1. Understand How Premiums are Calculated
Workers’ comp premiums are based on three factors. First, is your overall payroll, since coverage is paid per $100 of payroll.

Next is your workers’ class code rate. All workers are given a classification, determined by the State of NH and The National Council on Compensation Insurance, a national nonprofit. Each code is associated with a workers’ comp rate differential, says Will Infantine, managing director of King Insurance Partners in Manchester. Employers pay a higher rate for employees with riskier jobs.

Finally, there is your modification factor, sometimes called an experience mod or e-mod. This is a number based on the claims filed by your company over the past three years, says Ann Tracy, a claims advocate with The Rowley Agency, a Gallagher Company, in Concord, and a former workers’ comp claims adjuster. The industry average modification score is a 1.0. If your company has a lower-than-average amount of workers’ comp claim expenses, your modification factor will be lower. If your company has higher-than-average claim expenses, you’ll have a mod that’s over 1.0 and pay more for your policy.

2. Be Sure Workers are Properly Classified
One of the best ways to control costs is ensuring that workers are properly classified, says Infantine. There’s a “significant rate differential based on the code,” so if your workers are classified in a higher-risk category than their actual job, you’ll
pay more.

This is especially important for businesses that adjust their operations—and their employee’s jobs—seasonally. For example, an excavator operator digging trenches will have a different classification than an excavator operator grading land, Infantine says. An experienced insurance agent will be able to help you correctly classify workers, and update those classifications as needed, he says.

3. Work With an Insurer Experienced in your Industry
New Hampshire has plenty of workers’ comp insurers, so there’s lots of competition, Infantine says. That has contributed to the Granite State having lower-than-average workers’ comp rates, and it also means that businesses can find an insurance company that has experience in their sector. Some insurers cover low-risk industries, like office jobs, while others specialize in riskier industries like construction. “Insurance agents know [which company is] good for certain sectors,” Infantine says.

4. Take Advantage of State Programs         
The NH Department of Labor operates cost-containment programs meant to offset the costs of workers’ compensation, says Deputy Commissioner Danielle Albert. One relatively underutilized program is reimbursement for job modifications that help a person return to work. If, for example, a secretary is no longer able to type due to injury, an employer could be reimbursed for speech-to-text software so the worker can continue in his job. Getting an employee back to work reduces the indemnity costs of the claim, keeping your company’s modification score lower and controlling overall costs.

A more widely used program is the Second Injury Fund. If an employee has a previous injury, then has a second injury at work, this fund may cover costs of the claim, again helping to keep the company’s modification score lower.

To use the Second Injury Fund, “the employer must have written knowledge of the pre-existing condition,” says Paul Kfoury Jr., an attorney with Trombley & Kfoury in Bedford. This is done via a mandatory form filled out at orientation. Employers should explain this form to new hires and “let them know it doesn’t in any way affect their employment,” Kfoury says. Getting an honest accounting on that form could potentially save hundreds of thousands in future workers’ comp claims and increased premiums, he adds.

5. Have a Return-to-Work Policy
Each workers’ comp claim has two types of expenses: the medical expenses and the indemnity benefits that cover cost of lost wages. Employers have little control over medical expenses, but can minimize the cost of lost wages by getting workers back to work quickly, with a return-to-work program that offers light duties, says Tracy.

“The indemnity is the one way the employer can control the cost [of a claim] and return to work is the way to do that,” she says.

If you’re a small operation, you may need to think creatively to come up with a role that can fit an injured employee, but doing so is worth the effort, Tracy says. “It’s harder for those smaller employees to come up with light duty, but even if it’s part time, it helps in the long run.”

6. Pay Attention to Your Annual Audit
All workers’ comp policies in NH undergo an annual audit, where the insurer reviews claims on your books and employee classifications. It’s important to review that audit carefully and challenge it when necessary, Kfoury says, because the findings have a direct impact on what you’ll pay. “Don’t just accept the audit results without taking a good look at it with an agent,” he says.