Sometimes it seems as though workers comp fraud is the only reason we ever talk about workers comp.

Healthcare providers may join together in a scheme to be reimbursed for unnecessary treatments. Consumers may concoct plans to claim they need medical treatment for non-existent injury. Employers may misclassify employees to avoid paying workers comp insurance premiums.

It’s a huge problem. Workers’ compensation fraud is a $30 billion problem annually in the United States. In California, workers’ compensation fraud costs the state between $1 billion to $3 billion per year.

It’s absolutely vital to prevent fraud in your company.

Employers are always working to eliminate workers comp fraud on their workers’ part—but it’s important to prevent it on the employer side, too.

Misclassification is an illegal attempt to avoid paying full workers compensation premiums, taxes, wages, or other expenses. It also denies workers other benefits, such as overtime compensation and unemployment insurance. According to the Economic Policy Institute, 10-20 percent of businesses misclassify at least one employee as an independent contractor.

Misclassification can be an honest mistake—but the employer will still have to pay for perpetrating a fraudulent act.

Companies can misclassify employees as independent contractors, or misclassify employees in high-risk positions as working in lower-risk positions. These classifications can be difficult to determine accurately—so what’s an employer to do?

Contact an expert! Ask your accountant, your attorney, your insurance agent, and make sure you classify your employees correctly. 

There’s another level of worker classification to consider, and that comes into play on payroll records. In most trades, there are two workers compensation classifications for payroll reporting. The end result is that employers pay lower premiums for workers whose hourly wages rise above a certain level. But qualification for those low-rate classes relies on accurate, and verifiable, payroll records.

In a difficult economy, employers are always watching for ways to trim the budget—but it’s important to ensure that all penny-pinching is absolutely legal. Otherwise an employer is not only cheating his workers, his insurer, and the state, he’s also exposing himself to legal action, fines, and penalties.

For more than 25 years, Beall Financial and Insurance Services, Inc., has been helping corporations and individuals protect their most important assets. The agency’s client base covers a spectrum of businesses that require specialized insurance packages and knowledge. With offices in California and Indiana, Beall Financial and Insurance Services serves clients nationwide.