Workers’ Comp Management: What Every Franchise Owner Needs to Know

Want to learn how to manage workers’ compensation in staffing effectively? Discover tips to control workers’ compensation expense and protect your franchise’s profitability.

Running a staffing franchise comes with unique challenges, and one that’s often overlooked is managing workers’ compensation. In staffing, employees are working across a variety of roles—sometimes in environments you don’t directly control—and it’s your responsibility to ensure that those employees are safe and protected on the job. That makes workers’ comp a critical component of running your business. 

Beyond the legal requirement, workers’ comp can also protect your business’s profitability. If not handled properly, workers’ comp claims can quickly snowball, cutting into your margins and affecting your bottom line. So for staffing franchise owners, effectively managing workers’ compensation in staffing is about ensuring the long-term success of your business. Ready to learn the ins and outs of workers’ comp management? Let’s dive in!

The basics: Workers' compensation in staffing

Managing workers’ compensation may not be the most glamorous part of owning a staffing franchise, but it’s one of the most important. More than just a box to check, it’s about protecting your team, your clients, and your bottom line. Here’s what you need to know about workers’ compensation in staffing.

What is workers’ compensation insurance?

Workers’ compensation insurance is a safety net that protects both employees and employers. It provides financial support to workers who are injured on the job by covering medical expenses, lost wages, and rehabilitation costs. For employers, it offers protection against lawsuits that could arise from workplace injuries. In the staffing world, where employees often work in varied and sometimes unpredictable environments like manufacturing or warehouses, having proper coverage is vital.

What’s the difference between workers compensation vs personal injury claims?

When looking at workers compensation vs personal injury claims, there are a few key differences. Workers’ compensation claims cover injuries or illnesses that occur while performing job-related duties and provide benefits like medical expenses, wage replacement, and disability coverage. For example, if a warehouse worker injures their back while lifting heavy boxes, they can file a workers’ comp claim. Personal injury claims, on the other hand, apply when someone is harmed due to another party’s negligence or actions and typically occur outside your workplace. For instance, if someone slips on a wet floor in a store and the business failed to post a warning sign, they could pursue a personal injury claim.

Special considerations for workers’ compensation in staffing

As a staffing agency owner, your responsibilities go beyond what’s considered the “norm.” You’re not only managing workers’ comp for your own internal team but also for the temporary workers you place with clients. Both of these groups present different risks and needs that require careful management.

While your internal team may injure themselves while working in an office setting, temporary workers often work in industries with much higher injury risks, such as manufacturing, logistics, and construction. And since they’re not working directly under your supervision, you have less control over their day-to-day environment. This dual responsibility means staffing agencies must be extra diligent about risk management and choosing clients with safe workplaces.

Key cost factors for staffing agencies

Finally, there are few things you should keep in mind when you’re thinking about the potential workers’ comp costs for your franchise:

• Frequency and severity of incidents: The number and seriousness of workplace injuries significantly impact your workers’ comp costs. A higher frequency of incidents or more severe injuries will drive up your claims, increasing your overall expenses.
• Premium calculations: Your workers’ comp insurance premiums are influenced by factors like your industry classification, payroll size, and the type of jobs your employees perform. Riskier industries come with higher premiums, which can quickly add up in staffing.
• Experience modification rates (EMR): Your EMR is essentially a safety score for your business. If your agency has fewer claims than the industry average, your EMR goes down, reducing your premiums. On the flip side, a poor safety record can lead to higher costs. Maintaining a strong safety culture is key to keeping this score in check.
• Impact on profitability: In staffing, out-of-control workers’ comp costs can tax your bottom line. Every claim eats into your profits, so effective risk management and cost control are crucial to sustaining your business.

The financial impact of workers’ comp on franchise operations 

Now that we’ve covered the basics, we can dive a bit more into the specifics of managing your workers’ compensation expense. Let’s explore how workers’ comp costs affect your operations and what you can do to stay on top of them.

Initial and ongoing costs

As a new owner, part of your franchise financial planning will involve figuring out how to secure workers’ compensation insurance. This upfront cost depends on the types of roles your workers will fill and the level of risk associated with them. But it doesn’t stop there. Workers’ comp is an ongoing expense, and staying proactive about safety and claims management is key to keeping those costs predictable and manageable. Remember: Every workers’ comp claim has a ripple effect on your business, and a high number of claims—or a single severe one—can drive up your insurance premiums, cutting into your profits. 

Budgeting considerations for new franchisees

If you’re just starting out, it’s important to include workers’ comp costs in your budget. Many new franchise owners underestimate (or even overlook) this cost, which can lead to surprises down the line. Work with your franchisor or an experienced advisor to create a realistic estimate of premiums and factor in potential claim expenses. This kind of planning ahead gives you the flexibility to invest in other areas of your business without scrambling to cover unexpected expenses.

Spherion's approach to workers' compensation in staffing

At Spherion, we understand that managing workers’ compensation can feel overwhelming. That’s why we’ve developed a proactive, franchisee-focused approach to simplify the process, reduce risks, and protect your business.

Corporate support for franchisees

Don’t worry, you won’t be on your own when it comes to planning for workers’ compensation expenses! Spherion partners with an experienced outside vendor to handle claims and ensure injured employees are cared for. This includes investigating the incident, identifying what went wrong, and taking steps to prevent similar accidents in the future. Franchisees have full access to claim information, enabling you to stay informed about the outcomes and next steps. 

Risk management resources and training

We believe prevention is the best strategy, so we provide franchisees with robust risk management resources and training. From safety guidelines to on-the-job best practices, we equip you with the tools to reduce workplace incidents and create a culture of safety. Our risk team is always available to answer questions and provide guidance, ensuring you feel supported every step of the way.

Payment options tailored to franchisees

To make managing workers’ compensation expenses easier, Spherion has a centralized workers’ compensation fund. Each franchisee contributes to this fund based on anticipated claim costs for the year, which are carefully estimated by our risk department.

We also offer flexible payment options to fit your cash flow needs. You can opt for a “pay-as-you-go” model, where you cover claim costs as they occur, or choose to spread payments across 12 monthly installments. This flexibility allows you to manage your finances in a way that works best for your business.

Protect your business and thrive with Spherion

Managing workers’ compensation might seem like a challenge, but with the right support, it’s an opportunity to safeguard your employees, control costs, and strengthen your franchise’s profitability. And with Spherion’s workers’ comp support system—featuring corporate resources, expert guidance, and flexible payment options—you’ll have everything you need to handle this critical aspect of your business confidently. 

Ready to take the next step? If you’re a prospective franchisee, now’s the time to partner with Spherion and build a thriving staffing business with the full support of an industry leader. For more information, we invite you to connect with Dan Brunell, our senior vice president of franchise development. Whether you prefer to text, call, or email, Dan is here to chat! With more than 30 years of experience helping future franchisees, he’s ready to share valuable insights as you consider joining our franchise family.