6 Tips to Reduce your Janitorial Business’s Workers’ Compensation Costs

1 - Get your Classifications Right

Insurance companies need accurate information to set your cleaning company’s workers’ compensation coverage. They estimate the risk for your employees and base your premium costs on this information. Each job role has a different risk level.

Employee class codes help standardize these risk levels. Using the correct codes ensures you pay the right amount, while incorrect codes can increase your costs.

Verify your Janitorial Business’s Classification

Work with your insurance agent to ensure your janitorial business is classified correctly based on the services you offer. Small differences in service types can change your janitorial services workers’ comp class codes.

For example, being classified as code 9014 (standard janitorial services) instead of code 9170 (above-ground window cleaning) can change how much you pay for insurance premiums.

Classify your Workers Correctly

Make sure each employee is correctly classified according to their job duties. For example, your bookkeeper should be classified as clerical (class code 8810) rather than a janitorial worker. 

The national average workers’ comp rate for janitorial workers is $2.43 per $100 of payroll, while it's only $0.11 for clerical workers. This difference can result in substantial savings per employee annually, especially as your staff grows.

Consider excluding Owners 

Excluding owners from payroll calculations can also reduce costs. In larger janitorial businesses, excluding the owner might not make a big difference, especially if the owner’s work is mostly clerical.

However, in smaller businesses with a $50,000 payroll for a few part-time employees, excluding an owner who works on-site can significantly lower payroll costs.

2 - Create a written Safety Program

If you want to cut your workers’ compensation insurance costs significantly, focusing on safety is key.

By creating a formal safety program you will reduce accidents and claims and better yet; in some states the underwriters will apply a discount immediately for implementing this program. 

Analyze Industry Claims and Follow Guidelines 

Start by analyzing industry claims and identifying common injury patterns. This will help you understand the most frequent claims in janitorial services workers’ comp and implement measures to mitigate these risks.

Familiarize yourself with OSHA guidelines for janitorial services and adhere to industry-specific best practices. Industry associations often provide valuable written safety programs that can serve as excellent resources.

Here are some best practices to include in your safety program:

• Train employees on safe chemical use, proper cleaning methods, and the dangers of mixing chemicals
• Certify new staff for specific tasks, such as carpet cleaning and restoration
• Provide personal protective equipment (PPE) like gloves and masks for handling cleaning products
• Conduct regular maintenance and safety checks on cleaning equipment
• Encourage teamwork and proper techniques for lifting heavy items
• Maintain clean and organized workspaces, use slip-resistant flooring, and ensure employees wear proper footwear
• Address risks from chemical exposure and respiratory issues caused by inhaling aerosol products
• Stress the importance of reporting clutter, obstructions, spills, or any damage

Create the Written Program

Develop a comprehensive safety program that details processes, procedures, and expectations for all employees. Tailor the program to address the specific needs of different departments.

Form a Safety Team

Create a safety team by choosing employees from across the business who prioritize safety. These team members should meet regularly—at least once a month—to discuss safety-related issues throughout the organization. The safety team should also designate at least one person (preferably more than one) to ensure safety protocols are followed.

Providing Customized Training

Offer customized safety training to all employees. The safety team should help develop or select training materials, ensuring that all staff understand and acknowledge the safety program.

With a strong safety program, adherence to OSHA standards, regular safety meetings, and a safety-focused culture, you can greatly reduce workplace injury rates and workers’ compensation costs.

3 - Implement a Return-to-Work Program

Accidents and injuries are inevitable, no matter how cautious you are. It’s crucial to support injured employees in their recovery process. A return-to-work program helps injured employees recover by assigning them light-duty tasks.

Paying employees for light-duty work means the insurance only covers medical expenses, not lost wages, which lowers your insurance rates. This program is a highly effective yet often overlooked strategy for reducing workers’ comp costs.

Many insurance companies will ask if there is a formal return-to-work program and then offer reduced rates if one is in place.

Keep in mind:

1. Include the employee’s physician in the plan to ensure suitable tasks for the recovering employee and track their progress until they can resume regular duties.
2. Light-duty tasks should be less physically demanding to aid recovery.
   For example, if a janitorial worker injures their back, they could be assigned to manage supplies, handle scheduling, or perform administrative tasks. Allow more breaks and consider letting tasks be performed while sitting down.
3. Formalize the program with a written framework that explains it to employees, allowing some flexibility to adapt to various needs.

Check with your janitorial association for resources to help create a return-to-work program.

4 - Formalize your Drug and Alcohol-Free Workplace Policy

The janitorial industry can also be at risk for substance use disorders. By creating a formal drug and alcohol-free workplace policy and then ensuring it is followed, you can dramatically  significantly reduce on-the-job injuries. This reduction in risk will lower your workers’ compensation insurance costs annually.

Your policy should outline the consequences of violations, encourage employees to seek help for substance abuse issues, and support their return to work after treatment. Again, your janitorial services association can provide resources to help develop this program.

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5 - Lower your Ex-Mod

Your business’s Ex-Mod (experience modification rate) is an important factor that affects your workers’ compensation costs. The ExMod is a calculation that compares your specific loss history with those of similar businesses. 

The more frequent and/or severe your losses, the higher your Ex-Mod will be, which in turn increases your workers’ comp premiums. While you cannot eliminate your Ex-Mod, you do have some control here. 

Reducing the number and severity of your workers’ compensation claims is the most effective way to lower your Ex-Mod.

A formal safety program and a return-to-work program are crucial parts of this strategy. These programs directly reduce the indemnity (payments for the lost wages) portion of the claim, positively affecting your ExMod.  

Kickstand Tip: 

Remember, changes in your ExMod take time. It's based on a rolling three-year period, excluding the latest policy year. So, don't expect instant results. Stay patient and persistent with these strategies. Slowly but surely, you'll see a safer work environment and financial benefits. Keep at it!

6 - Ask about Dividends 

Many business owners miss out on potential savings from workers’ compensation insurance dividends. Inquire with your insurance agent about dividend options.

Typically, you pay the full premium upfront and receive a dividend after the audit, potentially getting back 5% or more.

Always remember, it never hurts to ask about dividends!

Want some help reducing your Workers’ Compensation Insurance Costs?

Want to lower your janitorial workers' compensation costs? Fill out a free instant quote, and we’ll show you how our services can help. 

If you want us to review your janitorial business’s policies and see how we can help you cut costs, fill out a free instant quote and we’ll be in touch.