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Workers compensation can be one of the most complicated and frustrating things you have to deal with if you are a contract recruiter running your own back-office. According to a recent newsletter we received from World Wide Specialty Programs, an insurance company for the staffing industry, here are the most common mistakes staffing firms make when administering workers comp:

Using the wrong Classification System
Most states use the classification system created and maintained by the National Council on Compensation Insurance (NCCI), which includes approximately 600 different classification codes. However, several states (California, New Jersey, New York, Delaware and Pennsylvania) have their own classification systems. The codes used in these systems are often similar to NCCI class codes, but they are not interchangeable, and you must use the codes specific to those states. This is especially tricky in Pennsylvania where there is a separate set of codes specific to the staffing industry. So if you are considered a staffing firm, you must use the staffing industry codes rather than Pennsylvania’s regular codes for the industry in which you are placing.

Assigning incorrect Classification Codes
In general, the code that should be assigned to a contract worker is the governing code of the client, so the easiest way to assign a code to a contractor is to ask the client what their governing code is. You should then submit the code along with the job description to your workers comp insurance carrier, making sure to have your own copies of that documentation in case you are audited. If you are audited and are found to have used the wrong classification code, you could be hit with premiums much higher than you expected.

Not having proper coverage for other states and countries
If you have a Single State, State Fund, or Assigned Risk policy, you can’t place contractors in other states. If you think there is a possibility that you may want to place in other states, you may want to purchase coverage from a standard market carrier that will allow you to add other states when necessary. Also, you should be aware that domestic workers comp policies don’t cover contractors in foreign countries. You will need to obtain extra coverage if you have or think you may have contractors working outside the United States. If you are not prepared for these situations ahead of time, you may lose out on deals because it may take more time to add the proper coverage than the client is able to give you.

If you are running your own back-office, it is essential that you are familiar with your workers comp state and federal laws, classification codes, and your own policy in order to avoid costly mistakes. Or you can outsource these responsibilities to a back-office service provider, such as FoxHire, which will be responsible for carrying and administrating workers comp policies for your contractors.

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