Self Employment Insurance: Workmans Compensation Fraud

When picking the brains of successful business owners I've had the opportunity to meet in the past, most have echoed in different ways a similar statement. "Keep your business small."

As your business grows and you hire more employees your overhead grows exponentially and your profit margin shrinks, leaving less room for error in any area of your company. Another business owner once told me that "The most efficient crew is a crew of one." Today when I see one man shows, I envy them because I know they are doing well. As long as they can keep the workflow going they can easily make more money on their own than they could working for someone else any day. The problem is that once these individuals (Including myself) realize how much they're making they naturally assume that they can make almost twice as much if they hire an extra set of hands. Then an extra set of hands becomes an extra crew. Then an extra crew becomes an extra division. Then everyone in the company thinks you're making millions even if you're struggling to keep half of them working during slower times. This is a time to be especially wary of insurance fraud.

It's at this point in the game when some of your employees may feel under appreciated. You know the ones. It's usually not the employees that you've had for years and that have been the basis of your success but rather the ones that have been there a short time and tend to call in sick alot. The ones who can continually amaze you with the creative excuses they have for being late or not calling in. The ones that get paid on Friday and want to borrow money on Monday. I used to wonder if one of my lead men might be having a fit of jealousy with the "new guy" when he would complain about his work habits. Now I choose to listen very carefully.

One of small businesses largest expenses is Workman’s Compensation Insurance. This insurance protects an employees salary should he get injured on the job. In theory this is a great plan. If people only used this insurance when they were legitimately injured there would be no problem. But today many people simply would rather not work and just collect what they justify to themselves that they are owed for their inadequate pay rate. My parents taught me that if you agree to work for a set amount of pay, that you should hold up your end of the bargain and do your absolute best. If you didn't feel that you could do your best work for the amount agreed upon, then you shouldn't accept the job.

The cost of Workman’s Comp. can vary widely depending on the field of work you are in. I am in the construction trade and my category is sheet metal worker because I make seamless aluminum gutters. My cost for workman’s comp is about $15 for every $100 that an employee makes. If I was a carpenter and framed houses for a living my rate would be about $21 per $100. So if my employee made $500 for the week building a house for me I would have to pay $105 in workman’s comp premium for that one employee. This rate assumes you haven't had any claims over the last year. If you have... then your exposure rate goes up and your premiums go higher because insurance companies don't lose money. This all adds to shrinking profits for your small business.

A few years ago I had an employee who claimed he hurt his knee while working in my gutter trailer. He didn't mention the injury to anyone. He simply didn't show up to work the next day. When asked why he didn't say something he said he didn't think it was a serious injury at the time. He went to the doctor who took x-rays, found nothing and prescribed him some anti-inflammatory drugs and told him to stay off of it for a few days. The doctor got my insurance information since the alleged accident happened at work. A couple of weeks later my beloved employee was receiving physical therapy and working under the table for one of my competitors to make ends meet until he started receiving his compensation checks. Fortunately I got wind of this and reported it to the insurance company. They had an investigator follow him and he never got a single check.

There are steps you can take to avoid fraudulent claims like the one described above.

1. Don't hire off the street. You may think you need help bad but take the time to actually go through the application / interview process and check the provided references for experience as well as character.

2. Provide a safe work place. This is one of the easiest and most difficult things for an employer to do. Don't let employees use sub-standard equipment just because you would use it to get the job done. Faulty ladders, extension cords, messy work conditions, failure to require safety glasses, hard hats, and harnessing equipment are all recipe's for a claim.

3. Accidents do happen. When one does, write a report immediately and get statements from fellow employees. Bring the employee to the hospital and request a drug test. Tell your employee that it is required by the insurance company. (Some companies do require this)

4. Cross your fingers and hope your employee is okay. If he is hurt he will appreciate your prompt response to the injury.