How do employers typically misrepresent to get lower premiums?

Employers often misrepresent their workforce status to secure lower insurance premiums by classifying employees as independent contractors instead of actual employees. This practice can lower premiums significantly because independent contractors typically fall outside the traditional employer-employee relationship that carries certain liabilities and associated costs, including workers’ compensation insurance. By using this classification, employers aim to reduce their financial exposure related to workplace injuries, as they do not have to cover independent contractors under the same insurance policies that apply to employees.

By understating the risk associated with their actual workforce, employers may manipulate the insurance model to their advantage. This misclassification can lead to serious issues both for the employees, who might not receive necessary benefits, and for the employer if an audit reveals the truth about employee status. Therefore, accurately classifying workers is essential for compliance and ensuring that insurance premiums reflect the actual risk presented by the workforce.