I want to start this article off by saying that I apologize. With the most recent set of storms that have come through our area, we have been absolutely inundated with claims issues, and I have not had time to post anything. As a lifelong resident of Florida and having been in the business for almost 30 years, I have never seen anything quite like it.
So, let’s talk about bringing on temporary employees. This can be a deep subject since each business is affected differently. The most common businesses that use temporary employees, are businesses in the construction trades, wholesale distributors, tourism related companies, etc.
Just about every carrier reserves the right to audit an insured. Whether they choose to do or not, is up to the carrier. However, most of them reserve the right to do so. One of the most common items that they audit, depending on the class code, is the payroll. Much like the IRS, when they audit the payroll, you will either get a refund, an invoice, or be spot on with your payroll amount. Again, this is very important to understand as we have had companies get audit invoices as high as $30,000 at the end of the year. Now, that’s not necessarily bad. Again, using the tax analogy, the higher your tax bracket the more money you make. So, the higher your payroll, the more money your company should have been making along the way. However, most people prefer to make their adjustments along the way so that they aren’t subject to large audit swings one way or another. Vice versa, if you have downsized your payroll, you need that working capital throughout the year, instead of waiting to get a refund from the insurance carrier at expiration.
Workers Compensation is one type of policy that is always affected by payroll. The surprise audits can be mitigated by going to a “pay as you go” type workers compensation policy. This basically means you report your payroll as you go throughout the year, and the premium is automatically adjusted to reflect the payroll amount. This way you don’t get hit with a surprise at the end of the year, and you have your working capital available to you as you go. Don’t forget to include your seasonal help in your workers’ comp policies. This could even be interns helping in the summertime on a temporary basis.
Another area that we often see temporary employee issues, is when people use “day laborers”. Outside of the payroll piece, many carriers do not cover these types of temporary employees. Therefore, if a claim arises out of “day labor” situation, the carrier may not cover it. This is an example: a claim arose from an HVAC contractor who was using “day labor” to run A/C duct work in the middle of the summer, unbeknownst to the agent. Unfortunately, two of the “day laborers” went back to a house that they had worked in and robbed the home at gun point. As you can imagine, the claim went from bad to worse quickly, when the contractor was told that “day labor” was not covered.
So, the moral of the story is to always check with your insurance agent about how your policy works with regards to your employees. If you think you will be doing something “out of the box”; Again, check with your insurance agent prior to moving forward with it.
If you have any questions on temporary employees, or any of our other articles, please reach out to us at 727-835-1500.
