Using Contract Skilled Labor May Reduce Workers’ Compensation Risk

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One of the most important things builders focus on for successful projects is employee safety. However, you may be surprised to learn how partnering with a staffing company may lessen the impact of workforce injuries on your business.

Under a staffing arrangement, a staffing company assigns its “temporary employees” to a “host employer” client. The staffing agency and client are then responsible for providing a safe work environment for temporary employees on a client worksite.

So, how does strategically using temporary workers help to mitigate workers’ compensation risk to host employers on projects?

1. Using Temporary Workers to Reduce Workers’ Compensation Risk

An employer is responsible for maintaining workers’ compensation insurance coverage on its employees. The cost to maintain workers’ compensation coverage is based on payroll size, injury history and claims management, and creditworthiness. In today’s inflationary environment, managing workers’ compensation is becoming more challenging as the cost of coverage continues to increase with rising medical care.

Using a staffing company may help a host employer better manage their workers’ compensation risk, as the staffing company is responsible for maintaining workers’ compensation on its temporary workers. For example, a new project may require additional and/or specialized workers to meet project workload demands and customer deadlines. Instead of hiring these short-term, new workers who may potentially increase the host employer’s workers’ compensation exposure for the project, the company could mitigate its workers’ compensation exposure utilizing temporary workers.

The staffing company would incur the cost of the workers’ compensation insurance coverage for injured temporary employees, whether minor or catastrophic. And in most cases, temporary employee injuries should not affect the host employer’s workers’ compensation coverage.* Moreover, temporary worker injuries should not affect a company’s Experience Modification Rate (EMR).

Construction worker

2. How to Protect Your Business to Ensure Workers’ Compensation Risk is Reduced When Selecting a Staffing Firm

There are many benefits to using a staffing firm, including reducing workers’ compensation expense. To realize these workers’ compensation savings, a company should consider the following practices when selecting a staffing company:

  • The staffing services contract should clearly state the responsibilities of the host employer and staffing company on insurance requirements and safety of the temporary workers. In particular, the parties should review tasks assigned and job descriptions, required safety training and PPE, jobsite exposures and temporary worker injury reporting.
  • The staffing company should provide the host employer with an Alternate Employer Endorsement on the staffing company’s workers’ compensation insurance policy, naming the host employer as an "alternate employer." Moreover, the staffing company should provide the host employer with a certificate of insurance providing proof of insurance coverage required under the staffing services agreement, including such Alternate Employer Endorsement.
  • As further protection in the event a staffing company’s workers’ compensation does not cover a temporary worker’s injury, a host employer should review its general liability insurance policy to ensure the term “employee” includes “leased” or “temporary” workers. If coverage does not include temporary workers, the host employer should consider obtaining an endorsement (CG 04 24) to cover injuries to temporary workers.
  • The host employer should evaluate the safety culture and programs of the staffing company. Some of the best staffing agencies have in-house safety departments and/or safety directors who may collaborate with the host employer to co-develop project-specific safety training programs and temporary worker injury-reporting processes.

If you would like to learn more about other staffing benefits and solutions in the skilled trade industries, feel free to contact Scott Speanburgh, senior vice president at Tradesmen International, at 407-694-3576.

* Workers’ Compensation laws vary by state. We recommend you consult with your legal counsel and/or insurance advisors on whether you are appropriately covered when utilizing temporary workers.

Tradesmen International, LLC provides skilled trade staffing services within the construction, industrial, renewable, marine, manufacturing, institutional and infrastructure industries throughout the United States and Canada. With over thirty years of industry experience, Tradesmen International endeavors to optimize their clients labor productivity and profits by utilizing its national recruiting platform to offer just-in-time talent who are qualified, reliable and safety-minded craftworkers.

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