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5-minute Homework Assignment:
1. What is your experience mod?
An experience mod is basically what is your rating relative to others in the industry.
2. What is your loss ratio?
Calculate your loss ratio by dividing what you've paid out in claims by the premiums that you've been paying out.
3. What is the 4-digit workers' comp code?
Hint: the events industry workers' comp code is 9154
4. Are you paying workers' comp on hours not worked, but paid?
It's important to start tracking hours worked versus hours paid. Jump to [00:04:01] for an example.
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Read the Transcript 📚
Intro: Welcome to Corralling the Chaos Podcast, where we talk publicly about the things you're worried about privately. My name is Angela Alea, and I'm your host. This is the event industry podcast for companies and crew where we're gonna dive deep into things like, what does our industry need that it just doesn't have?
[00:00:20] Angela Alea: Today's episode is going to be short and sweet, and is actually going to end with a little homework assignment. But don't worry, it's a homework assignment that's going to be quick. And most importantly, it can pay off with dollars going straight to your bottom line, so pay attention. Alright around here we obviously talk about things that really primarily impact your cost of goods sold.
[00:00:43] People of course being a big component of that. And today we want to talk about rate cutting. But don't worry, I promise we're not talking about cutting pay rates. We're going to talk about cutting a different type of rate. And I want to talk about something that could be costing you two [00:01:00] to three extra points on your margin, and you may not even know that it's lurking there, hidden behind just having wrong information.
[00:01:08] I'm talking about worker's comp. But before you roll your eyes and you think, I got that. Let's see if you can answer these three to four questions. Question number one, what is your experience mod? Question number two, what is your loss ratio? Question number three, what's the four digit workers comp code that you have?
[00:01:30] And the fourth question is, Are you paying workers comp on hours that are not worked but paid? So I'm talking about those position minimums or guaranteed day rates that you're paying. All four of those things can have a drastic impact on your workers comp cost. So let's kind of take apart each one of those.
[00:01:50] Number one, what is your experience mod? You should find out what that is. And an experience mod is basically what is your rating [00:02:00] relative to others in the industry? How safe are you within the event industry? How do your claims compare? Which leads me to the second thing. What are your loss ratios? A loss ratio is you know, what have you paid out in claims divided by the premiums that you've been paying out?
[00:02:20] And so if that loss ratio is anything above a 0. 6. You're probably not getting good rates because your insurance carrier to break even they, they try to be around 6, meaning right? That extra 40% is going to pay to cover the administrative costs, the tail on the claims, all those sorts of things. So, look to see what your loss ratio is.
[00:02:42] Again, if it's over 6, you probably got a higher rate. The 3rd 1 is what is the 4 digit code? This is one of the biggest needle movers. The workers comp code for our industry is, get your pen and paper out, 9154. Now, [00:03:00] on your schedule of operations or your declaration page if you see that, you're going to see that it says theater, all other employees.
[00:03:10] So, just like our industry doesn't have our own SIC code, Yet again, our industry doesn't have a true formalized workers comp code, but that is the workers comp code that is standard for our industry. We see declaration pages that have furniture builders pyrotechnics, all different types of things. And so make sure that your code is 9154 For all states that you operate in and the way you can find that is on your insurance.
[00:03:41] It's called a declarations page or a schedule of operations. You'll see your office employees will say 88 10 clerical. You're going to pay less for them than you would in your people in your field because obviously the risk is lower, but that's going to be 1 of the biggest needlemovers. And then the fourth thing that you can look at is are you [00:04:00] paying on hours worked, not paid?
[00:04:01] Do you have a way to even track that? So, for example, I pay a camera op 10 hours a day to come in, run camera. My day might only last 7 hours. Of course, you're going to pay him 10 hours, right? That's his daily minimum. That's what you're or 45 dollars an hour. And you're paying workers comp on 10 hours.
[00:04:24] It's not necessary. You weren't exposed for those extra three hours. And so look into ways that you can see, can you track hours worked versus hours paid? A lot of time systems out there should track that. Many don't because that's not a normal thing unless you're in our industry to have a discrepancy between hours worked versus hours paid.
[00:04:46] But that's the fourth thing that you should be looking at. So again, what is your experience mod? What are your loss ratios? If you don't have an answer to either one of those, find that because if you have really strong loss ratios and you're still paying a [00:05:00] high rate, shop it around. It can be really expensive.
[00:05:03] Again, the four digit code is 9 1 5 4, and then look for ways to track hours worked versus hours paid. So when you go through that workers comp audit at the end of the year, you're not paying on the full boat that you've been paying. Another thing to look at is cash flow since cash is so important. The cost to borrow is so high today.
[00:05:26] So another thing to look at is a pay as you go workers comp program versus at the beginning of the year. I'm estimating I have a million dollars in payroll. And then they ask you to pay that up front. Then you go through your audit at the end of the year. You typically owe or you're reimbursed versus do it, pay as you go.
[00:05:45] It's a little bit more predictable. You're not outlaying cash that you then would get back later. So that's another just kind of extra tip in there for you. So hopefully you can find good things in that. Would love to hear stories from you all on what you find, what you're able to save. [00:06:00] Because every time we go through this exercise with our clients.
[00:06:02] They're always able to find something, at least a state or two where they're coded incorrectly. So just use that as leverage, be educated, be knowledgeable when you're talking to your broker on exactly what you're looking for. All right, that's it. If you like what you hear, please be sure to hit subscribe.
[00:06:20] If you have questions, comments, feedback, reach out to us at podcast@lasso.io. Thanks everybody!