Auto Dealers: This Workers Comp Trick Can Save You Thousands | WIMC

May 19, 2025

See How We're Different

or call us: 866-226-4436

Auto Dealers: This Workers Comp Trick Can Save You Thousands

The Hidden Costs of NOThe Hidden Costs of NOT Having WorkersT Having Workers

The world of auto dealerships is fast-paced, competitive, and demanding. With a workforce that spans various roles from salespeople to service technicians, managing expenses can become a challenging task. Among the many costs that a dealership faces, one of the most significant expenses is workers' compensation insurance. This essential coverage protects employees in the event of injury or illness sustained while working. However, what many auto dealers may not realize is that they could be overpaying for workers' comp, and there’s a clever trick that could save them thousands of dollars every year.

In this article, we will delve into how understanding and optimizing workers' compensation insurance can have a substantial financial impact on your business. Whether you're a small dealership or a large operation, the insights provided will help you reduce your workers' comp costs while ensuring your team is protected.

Understanding Workers' Compensation Insurance

Workers' compensation insurance is a type of coverage that most businesses are required to have by law. It covers the medical expenses, lost wages, and other costs related to injuries or illnesses that employees sustain while on the job. Auto dealerships are not exempt from this requirement, and their diverse workforce makes this type of insurance even more crucial.

The cost of workers' comp is determined by several factors, including the type of work employees are doing, the risk of injury, the size of the workforce, and the state in which the dealership operates. Auto dealerships typically employ a range of workers, such as sales staff, administrative workers, service technicians, and mechanics. Because of this wide range of duties, workers' comp premiums can vary significantly depending on the specific job roles and associated risks.

Why Are Workers' Comp Costs So High for Auto Dealers?

There are several reasons why auto dealerships might face steep workers' comp premiums. One primary factor is the inherent risks involved in the automotive industry. Service departments, in particular, have higher injury risks. Mechanics and technicians often work with heavy equipment, tools, and machinery, all of which can lead to workplace accidents.

Furthermore, dealerships that offer vehicle repairs, maintenance, or body work might also have higher premiums due to the hazardous nature of some of the tasks involved, such as welding, lifting heavy components, and working with potentially dangerous chemicals. Additionally, the larger the workforce, the more employees you have to cover, leading to higher overall insurance costs.

Another reason is that auto dealerships typically employ a combination of full-time and part-time workers, each with different wage structures. Workers' compensation premiums are often calculated based on payroll, so the more payroll a dealership has, the more expensive the premiums can become.

However, there is a silver lining. Understanding how workers' comp insurance works and leveraging strategies to reduce your premiums can help mitigate some of these costs.

The Trick That Could Save Auto Dealers Thousands

So, how can auto dealers reduce their workers' compensation expenses? The trick lies in understanding how workers' comp premiums are calculated and implementing a strategy to optimize those calculations.

One of the most effective ways to reduce workers' comp costs is through classification audits. This trick involves ensuring that your dealership's employees are classified correctly for workers' comp purposes. Workers' comp rates vary depending on the risk associated with different job duties, so accurate classification is crucial.

Here’s how this can save you money:

The Importance of Accurate Classification

When you purchase workers' compensation insurance, your dealership is assigned a classification code based on the type of work your employees perform. Different classifications carry different rates, and misclassification can result in overpaying for your premiums.

For example, workers who are primarily engaged in low-risk office tasks, such as receptionists or administrative staff, should not be classified under a higher-risk code reserved for mechanics or technicians. If these employees are misclassified and lumped into the same category as higher-risk workers, you may end up paying higher premiums than necessary.

This is where an audit comes into play. By reviewing the classifications assigned to your employees, you can ensure that each worker is classified according to the specific duties they perform. If any workers have been misclassified, you can correct the error and potentially lower your workers' comp premiums.

How Classification Audits Can Save You Money

Classifications are often updated based on industry standards, so it's possible that your dealership’s workers were initially classified under an outdated or incorrect code. This can lead to significant overpayments.

For example, let’s say your dealership has a mix of employees, some of whom are working in customer service roles that are relatively low-risk, while others are in the repair and maintenance department, which is high-risk. If the customer service employees are mistakenly grouped into the higher-risk category, the dealership would pay much higher premiums than necessary.

By conducting regular classification audits, you ensure that each role is properly categorized, which can significantly reduce the total premiums you pay. For example, if you manage to reclassify several of your employees into a lower-risk category, your premiums could drop substantially. This simple step could save you thousands of dollars a year.

The Role of Payroll Audits

Alongside classification audits, conducting payroll audits is another critical step in ensuring you’re not overpaying for workers’ comp insurance. Workers' comp premiums are typically calculated based on your dealership’s payroll, so it's important to ensure that your payroll records are accurate.

Inaccuracies in your payroll records—such as misreporting employee salaries, failing to account for seasonal fluctuations, or not properly accounting for part-time workers—can result in inflated premiums.

By performing regular payroll audits, you can make sure that you're only paying premiums based on the actual wages of your employees, not inflated or outdated numbers. This is especially important for dealerships with seasonal workers or fluctuating payroll due to bonuses or overtime pay. If these are not accounted for correctly, it could result in a higher-than-necessary premium.

Optimizing Your Experience Modification Rate (EMR)

Another way to potentially save thousands on workers’ compensation premiums is by optimizing your Experience Modification Rate (EMR). The EMR is a key factor used by insurers to determine the level of risk a business poses. It is based on your dealership’s history of workplace injuries and claims.

The lower your EMR, the lower your premiums. Dealerships with a high number of workers' comp claims, particularly serious injuries, will likely face higher rates. On the other hand, businesses with a clean safety record will generally see their premiums decrease over time.

By improving workplace safety and minimizing accidents, you can lower your EMR. This, in turn, will reduce your workers' comp premiums. Safety training programs, proper use of personal protective equipment (PPE), and fostering a safety-first culture can all contribute to reducing the likelihood of accidents and keeping your EMR in check.

Implementing a Return-to-Work Program

In addition to reducing the number of claims, another tactic dealerships can use to lower workers' comp premiums is implementing a return-to-work program. This program allows injured employees to return to work in a light-duty capacity, often before they have fully recovered from their injury.

The benefit of this program is twofold. First, it can help reduce the overall costs associated with a workers' comp claim. When employees remain off work for extended periods, the costs associated with their injury, including medical bills and wage replacement, can mount quickly. By bringing them back to work as soon as they are able, even in a limited capacity, dealerships can reduce these costs.

Second, return-to-work programs can help reduce the number of workers' comp claims that result in long-term or permanent disability. Keeping employees engaged and involved in the workplace, even in a modified role, can reduce the likelihood of them filing a claim for permanent disability benefits.

< Older Post

Newer Post >