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NEWSLETTERS
NEWSLETTERS
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In this issue
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Implementation of Zero Lost Time Program Lowers Mod & Returns $177,840 To Plumbing
Contractor
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Coordinate FMLA and Workers' Compensation or it will cost you time and money
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Independent contractors and Workers' Compensation
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Implementation of Zero Lost Time Program Lowers Mod & Returns $177,840 To Plumbing
Contractor
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Insured
The insured is a residential plumbing contractor with 265 employees and annual revenues of $40 million.
Situation
The company was in a transitional stage causing a higher-than-average claims activity. The result was a large number of open claims that included indemnity and an Experience Mod of .98 and rising.
Assessment
Certified WorkComp Advisors (CWCAs) reviewed the situation and realized that the Experience Mod was being driven up not only by the number of claims, but also by the number of malingering claims that were not successfully closed. In fact, because there was no injury management process in place, 80% of the lingering claims included indemnity.
Solution
Putting the number-one focus on injury management, the CWCAs implemented a Zero Lost Time Program. They set up a model program by creating a transitional job bank, establishing a relationship with the local medical provider, and developing a comprehensive injury prevention package. They also set up educational meetings with all site managers, and created an incentive program built around work safety and loss time.
Result
The company's loss ratio decreased over a two-year period from 80% to just 9%. Along with a drop in the Experience Mod from .98 to .66, the company received a 25% Experience Credit from the carrier due to the decrease in the loss ratio, resulting in a total savings of $177,840.
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Coordinate FMLA and Workers' Compensation or it will cost you time and money
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The Family and Medical Leave Act (FMLA) is a federally mandated law that applies to employers with 50 or more employees and public agencies and schools. It allows eligible employees to take up to 12 weeks of job-protected leave to attend to family and medical problems, including medical leave when the employee is unable to work because of a "serious health condition."
While the law does not differentiate between work-related and non work-related injuries and illnesses, many employers treat Workers' Compensation leaves separately from FMLA and do not realize that a Workers' Compensation leave should trigger the FMLA process, even if the employee does not seek a FMLA leave.
The first step is to determine if the injured employee is eligible for leave under FMLA. If the employee is eligible, the employer should notify the employee in writing that the Workers' Compensation leave will run concurrently with and be treated against the employee's FMLA entitlement of 12 weeks. This notification must also include the proper information to meet FMLA requirements.
If the employer does not properly notify the employee, the employee may be entitled to an additional 12 weeks of FMLA leave. It is the employer's responsibility to establish the FMLA leave. If the FMLA leave is not triggered at the beginning, serious complications regarding health insurance coverage and COBRA, as well as reinstatement issues, can develop.
Supervisors, foremen, and superintendents often are unfamiliar with FMLA requirements. It is important that they be trained and a procedure is in place to immediately notify HR personnel of Workers' Compensation leaves.
FMLA and return-to-work
If an injured employee is offered modified duty to return to work and is on FMLA leave, The employee can refuse the modified duty position. However, FMLA leave is meant to be unpaid; while medical payments will continue under Workers' Compensation the indemnity may discontinue with the refusal to return to work. The employee then can be allowed to use any accrued paid leave (vacations, sick time, etc.) during the remaining unpaid FMLA leave. |
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Independent contractors and Workers' Compensation
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The decision to classify workers as employees or independent contractors is a decision that has crucial consequences for both Workers' Compensation and taxes. Even the unintentional misclassification of an employee as an independent contractor can result in a myriad of consequences including liability for injuries suffered by employees when Workers' Compensation insurance is not secured and payroll tax liabilities.
The amount of control exercised over the worker is the principal determining factor as to whether the worker is an employee or independent contractor. The IRS formerly used what has become known as the "Twenty Factor" test. Under pressure from Congress and from representatives of labor and business, it consolidated the twenty factors into eleven main tests, and organized them into three main groups: behavioral control, financial control, and the type of relationship of the parties. Those factors appear below, along with comments regarding each one (source: IRS Publication 15-A, 2007 Edition)
Behavioral control
Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired including the type and degree of:
1. Instructions the business gives the worker. An employee is generally subject to the business' instructions about when, where, and how to work. All of the following are examples of types of instructions about how to do work:
* When and where to do the work
* What tools or equipment to use
* What workers to hire or to assist with the work
* Where to purchase supplies and services
* What work must be performed by a specified individual
* What order or sequence to follow
The amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right.
2. Training the business gives the worker. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods.
Financial control
Facts that show whether the business has a right to control the business aspects of the worker's job include:
3. The extent to which the worker has unreimbursed business expenses. Independent contractors are more likely to have unreimbursed expenses than are employees. Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. However, employees may also incur unreimbursed expenses in connection with the services they perform for their business.
4. The extent of the worker's investment. An employee usually has no investment in the work other than his or her own time. An independent contractor often has a significant investment in the facilities he or she uses in performing services for someone else. However, a significant investment is not necessary for independent contractor status.
5. The extent to which the worker makes services available to the relevant market. An independent contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market.
6. How the business pays the worker. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when a commission supplements the wage or salary. An independent contractor is usually paid by a flat fee for the job. However, it is common in some professions, such as law, to pay independent contractors hourly.
7. The extent to which the worker can realize a profit or loss. Since an employer usually provides employees a workplace, tools, materials, equipment, and supplies needed for the work, and generally pays the costs of doing business, employees do not have an opportunity to make a profit or loss. An independent contractor can make a profit or loss.
Type of relationship
Facts that show the parties' type of relationship include:
8. Written contracts describing the relationship the parties intended to create.
9. Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay.
10. The permanency of the relationship. If the company engages a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that the intent was to create an employer-employee relationship.
11. The extent to which services performed by the worker are a key aspect of the regular business of the company. If a worker provides services that are a key aspect of the company's regular business activity, it is more likely that the company will have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship.
Do not underestimate the difficulty of applying these standards to specific individuals performing services. In doubtful cases, always seek expert advice. It is also important to become familiar with state statutes, as some may be more or less restrictive in their definition.
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Retention strategies that work
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Retaining skilled employees is one of the most difficult challenges facing organizations today. Turnover is extremely costly; it is estimated the cost of turnover is anywhere from 50% to 150% of an employee's annual salary. In addition to the hard costs associated with turnover, there are the soft costs - lack of productivity of the departing employee and new employee, the "drag effect" on other employees, the impact on customer/vendor/client relationships and so forth. Furthermore, attrition can be contagious, multiplying costs rapidly.
According to the Gallup Organization, there are three primary reasons why people leave their jobs:
1. Fit - The job was not as expected and/or the employee did not perform as expected. This usually occurs in the first six months of employment and is a result of a poor hiring process or the wrong choice.
2. Career advancement - It is important to create career ladders in the organization. Even if there are not opportunities for advancement, give employees the opportunity to be more valuable in the job they are doing. People want to feel good about what they are doing and feel they are contributing.
3. Relationship with boss - More than any other single reason, people leave because of the relationship they have with their immediate manager. "People leave managers, not companies," state Gallop study authors Marcus Buckingham and Curt Coffman. "So much money has been thrown at the challenge of keeping good people - in the form of better pay, better perks and better training - when in the end, turnover is mostly a manager issue."
What does it take to keep employees? Our strategic partner, HR That Works! offers the following suggestions:
1. Design different strategies for different employees
While there are common elements of successful retention policies, the most effective policies recognize the needs and expectations of their employees will vary by age and level of responsibility. Low wages earners are focused on economic survival - a wage above competitors and a system of recognition can be an effective retention strategy. High earning executives focused on self-actualization will want to see a clear career path, have the opportunity to increase their value to the marketplace and be part of a leadership team.
2. Orientation process
A large percentage of turnover occurs within the first months of employment. Use the orientation process to build workplace relationships and make new employees "feel at home." Assign employees a mentor, pay for lunches with co-employees, and involve them early on in employee activities.
3. Survey your employees
Ask your employees what it will take to keep them. For new employees, survey them 60 days after they start. Have a regular schedule - monthly, bi-annual or annual to get input and feedback from your employees.
4. Train your managers and employees: create a culture of pride
Pride of workmanship is a top retention strategy. Managers need to communicate expectations, instill confidence, and recognize and reward employees who do a job well. Good managers must know not only how to manage but also how to value employees. Engage employees and managers in career planning, so that they understand the potential for growth.
5. Know how competitive your salaries and wages are
When a workforce is paid above the norm, compensation falls by the wayside as an important retention factor. If you want to hire the top 10% of the available workforce, you may have to pay in the top 10% of compensation as well.
6. Nurture your top quality employees
The energies of management are often focused on the 20% of the workforce who cause problems. Be sure that your managers are attuned to changes that might signal discontent from your top employees. Consider offering retention or referral bonuses.
7. Conduct exit interviews
An exit interview can be an invaluable source of information, even if you have to pay the departing employee to take it. Don't assume the reasons are known. Often managers will compartmentalize what they believe vs. what the employee feels.
The concept of loyalty continues to lose ground. Businesses can no longer offer the job security they once did and younger generations are not motivated by loyalty. The motivation focus continues to move away from the employer and towards the individual. Understanding what motivates the individual employee, training managers to create effective relationships and value employees, and offering opportunities for growth are the foundations for an effective retention strategy.
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