Increasing Work Comp and Unemployment Insurance Cost Means Fewer Jobs

It’s time for Missouri and Kansas businesses to put real pressure on our legislators and governors, and tell them to step up to the plate regarding reform to the worker’s compensation system; especially in Missouri. In fact, the unemployment insurance system could use some serious tweaking on both sides of the state line as well. Some view these two systems as mechanisms for people to get their hands on free money. The ultimate cost is fewer jobs.

Before painting these two issues with a broad stroke of the brush, it should be noted that many employees utilize both of these compensation systems for their true purpose, and go back to work as soon as possible. However, there are far too many people who abuse these systems, which costs employers in Missouri and Kansas millions of additional tax and insurance dollars that could be used for growing and expanding their businesses. That savings, put back into business operations, could mean additional jobs.

For a company included in the infamous assigned risk pool, an $8,000 annual Missouri worker’s compensation premium actually can become a $20,000 annual premium, or more, once all of the additional surcharges and the experience modification are added in. Missouri has eight additional surcharges and Kansas has four! And, Missouri classification rates are sometimes double that of Kansas, on top of the four additional surcharges in the “Show Me” state. This is getting nuts.

The companies thrust into the assigned work pool suffer the most financially. Some companies don’t care about their workers’ safety and, therefore, deserve to pay more. However, insurance companies can classify your business as one that belongs in the pool even if you don’t have many accidents, or severe accidents. Even if you do well with work safety and 90 percent of your payroll is clerical in nature, just a couple of accidents in the office over the span of a couple of years can cause your experience modification, and eventually your premium, to skyrocket. Even if the accidents are the employee’s fault, the employer still has to pay.

If an employee goes to sit down in their chair and they miss it, through no fault of the employer, it can cost the company $30,000. And, the company eventually ends up paying the tab. In fact, worker’s compensation insurance isn’t really "insurance"; it is a "you’ll eventually pay up" program.

In addition, Missouri and Kansas businesses are paying more into the unemployment insurance systems this year than last year. Missouri raised the excess wage per worker rate from $7,500 to $8,000 (a 6.7 percent “tax” increase), and Kansas used a clever mechanism to raise the percentage businesses pay into the system by passing along a sneaky tax increase to all businesses regardless of how well, or how poorly, terminated workers performed (business socialism tax). More taxes plus higher workers’ compensation costs equal fewer jobs. It’s that simple.

Carlos Riojas is president of Riojas Enterprises Inc. and Able Employment.