Tip to Ensure You’re Not Overpaying In Workers Compensation
There’s a simple fact that no one wants to pay more workers’ comp premium than they need to. Hello. My name is Michael Stack and I’m the CEO of Amaxx and that simple fact that nobody wants to pay more workers’ compensation premium than they need to. I want to give you a little tip to ensure you’re not overpaying a little tip to ensure you’re not overpaying, particularly if you are in the construction type industry, particularly if you’re in the construction type industry. And the tip is what is in the title of this video pub, which is get a certificate insurer of insurance for your independent contractors. And I want to tell you why. So what your certificate of insurance ensures that that contractor, which you’re hiring actually has a workers’ comp policy. So they actually have a worker’s comp policy. So let’s take a look at what actually happens here.
Importance of a Certificate of Insurance
I want to give you this little diagram. So you’ve got the Acme construction company, so Acme construction, and they hire, you know, the, the Trinity, uh, dry wall organization. So the Trinity dry-Wallers and the Trinity dry-Wallers either have a certificate of insurance or they don’t. And if they have a certificate of insurance, then there and they hurt their shoulder, you know, the guy hurts their shoulder out there doing the drywall. The claim is going to report it over here to Trinity. If they do not have a certificate of insurance, the claims reported over here over to the Acme construction company. Why you need the certificate business shirts at particularly at your premium audit is that if you don’t show this evidence of this payroll that you’ve paid for them, then all of this money, let’s say you’ve paid these guys, you know, $200,000 over the course of a year.
You hire them regularly. All this amount that you’ve paid them is now assumed to be over here. But if you give them the certificate, if you show them the certificate, none of that money is assumed over here. It’s a very simple concept. It’s a very simple concept to understand. It’s a very simple concept to execute, but it’s also very simple to miss. It’s very simple to miss when you’re going through this audit process. And it’s a little piece of paperwork that likely your auditor may or may not remind you of. So if you’re not doing this properly, if you’re not checking this box, if you’re not documenting this properly, you’re just paying a lot more than you need to. And as I said, nobody wants to do that. So make sure that you have your certificates of insurance for your subcontractors properly documented. So you’re not overpaying more than you need to.
Separate Your Labor Versus Materials
One more little tip here is if you do not have a certificate of insurance, if you know when you’re hiring Trinity, oh yeah. Well, you guys don’t have your own workers’ comp. You’re going to be over on our insurance. And maybe you’re pricing that into the job. You’re pricing it into whatever you’re paying them for whatever reason. The other thing that you want to make sure that you do is separate. So separate your labor versus materials. So separate your labor versus material. And I’m going to give you a little quick tip on how this is. So let’s say you pay a, you have a $20,000 job. 5,000 of that is materials materials.
And 15 of that is labor. You don’t need to pay workers’ comp premium on this 5,000 in materials. You don’t need to pay workers’ comp premium on this 5,000 and materials. So if you are including them in your payroll numbers, make sure on that invoice that the labor and the materials are separated out. So you’re not paying more than you should. And 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’s 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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