Your employer is paying any type of insurance premium. The amount of payroll that employer has is a massively important input, ultimately into the amount of premium that employer pays. Hello, my name is Michael Stack. I’m the CEO of Amaxx. And today I want to talk about just making sure that you’re not overpaying. Nobody likes to overpay for work comp insurance or frankly, for anything for that matter. And I want to talk about a key deduction when you’re going to analyze and audits and refine the payroll that is being used to calculate the amount of premium a company is paying. And I want to talk about this idea of overtime and double time. This is a very common payroll deduction that is missed by employers. It’s just missed by employers. Now, conceptually, I want you to think about this first and just kind of understand before we talk about what this deduction is, understand philosophically, what it means.
Accurately Assess the Risk
So all we’re trying to do in a work comp premium or all the insurance carrier is trying to do in a work comp premium. The amount that an employer is paying is just accurately assess the risk accurately assess the risk. The way that the payroll calculation goes in is the amount of time your employees are working. So if you have more employees working more often, the odds of them getting hurt are higher. So that kind of just makes sense. If you have more employees working more often, the odds of getting hurt are higher. So yeah, that makes sense. And then the premium would be higher because of that, because the risk is higher because you just have more opportunity for people to get hurt.
Overtime and Double-time
Okay. So conceptually, you can get there. I want you to think about this deduction and the meaning behind why overtime and double time would be removed from that equation.
So let’s say you’ve got Nick, you know, Nick is working, let’s say in construction or he’s working on the docks or whatever Nick is doing. And Nick has been racking up the overtime. You know, the, employees have been out, et cetera. Their bunch new work has come in and Nick is just cranking through this overtime. So he’s getting, you know, two times his normal salary philosophically, if you think does, because the fact that he’s getting two times as normal salary mean he’s more two times more likely to get hurt. And of course the answer is no, you know, he’s just working more hours. You should be multiplying him times, one times what his normal salary would, would be. The point of this very simple demonstration is that this overtime and double time should be removed from your payroll calculation over time in double time should be removed from your payroll calculation.
Huge Financial Impact
So let’s say, you know, this is a $10,000 in additional fees or what he would be making double time. And normally it’s $5,000. So you should be taking 5,000 out of that payroll calculation, looking at one worker over a short period of time. You’re saying now 5,000 may or may not make that big of a difference in my ultimate premium, take this over hundreds and thousands of employees over the course of an entire year. And this number can be massive impact in premium can also be a huge, huge financial impact. Very simple thing, very easy to miss, and very easy to just add a bunch of money to what you’re paying in premium unnecessarily. Again, my name is Michael Stack. I’m the CEO of Amaxx. Remember your work today in workers’ compensation can have a dramatic impact on your company bottom line, but it will have a dramatic impact on someone’s life. So be great.
Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is the founder & lead trainer of Amaxx Workers’ Comp Training Center, which offers the Certified Master of Workers’ Compensation national designation.
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