We received this workers' comp insurance question from a reader. The company considered keeping 40% remote-workers level even though the trend recently leaned toward returning employees to in-office work:

James Moore

We are a health-based company operating in three states. After the pandemic, we slowly ramped up production to pre-2020 levels. Almost 1/2 of our staff can still be off-site working from home. Do we still need to provide remote worker workers' comp insurance even though the remote workers have a reduced chance of injury? Can we make them all 1099 subcontractors? Can we reduce the workers' comp insurance we pay for our remote workers?

Congrats on your company’s successful recovery after the pandemic. Many companies such as yours realized that many workers can still productively work remotely or from home, which can save overhead costs such as office space, utilities, etc.

One possible way to save comes to mind. Let's cover that last.

A serious injury

Even though the workers will not return to in-office work, they are still your employees. Many injuries have occurred with in-home workers over the last 20 years.  For example, one of our major clients had a remote worker who worked 18 hours a day — a productive employee. She had such heavy eyestrain that a treating ophthalmologist related a corneal tear injury to her work. The claim incurred payouts of over $150,000 due to her being out of work for more than three years and for the extensive medical bills to save her eye. The costs are ongoing.

The risk may have been lowered with remote workers, but they still carry a risk of injury. If you are paying them as employees, workers' comp would still be a requirement in almost every instance.

1099 workers

A company with remote workers cannot eliminate the need for comp insurance. If one of the workers is injured at home, who would be responsible for his time out of work and medical bills, such as with the corneal injury?

Any premium auditor will catch a list of subcontractors as former employees. If your goal is saving on workers' comp, you may end up paying for the former employees regardless, and your carrier may cancel your company mid-term for attempting this method.

Each state is unto itself on workers' comp. Check out the IRS rules on subcontractors here. The publication is called 15-A, or you can check out this post on the same subject.

Possible savings

If your company has on-site and/or off-site administrative assistants, billing department workers and other types of employees, a delineation should be made among them. Why? Because on-site workers carry more risk than off-site workers. These employees may need to be under different classification codes, such as 8810 or 8871. Each state has its own rules on who classifies as a clerical worker or a telecommuting employee.

You could possibly be charged manufacturing class codes for remote workers, especially now that most in-person physical premium audits have not begun post-pandemic.

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.