| Introduction: | | | | Has the premium gone down as the company has |
| Due Diligence is the verification process of information | | | | downsized? |
| and its associated documentation to ensure a | | | | What have been workers' compensation claims? |
| reasonable individual "that they get what they are | | | | What are the premiums? |
| paying for". When buying, selling or forming a joint | | | | Does the company have a pension plan? |
| venture it is very important that the books and records | | | | - Is it a private plan? |
| are verified and tested to ensure the historical financial | | | | - How is the plan funded? |
| results are validated. If your company has a team of | | | | - Is the company part of a multi-employer plan? |
| professionals who have experience in multiple | | | | - What is the potential liability if the company were to |
| transactions and a detailed checklist to follow that is | | | | withdraw from the multi-employer plan? |
| probably an exception to the rule, most companies due | | | | - What pension fund liability does the company have |
| these type of transaction infrequently. Therefore, it is | | | | now? |
| recommended that due diligence be a coordinated | | | | - Is the plan over funded? |
| effort with members of the company and an outside | | | | - Can cash be made available for operations? |
| firm who has experience with the due diligence | | | | - Has the company recently changed any pension |
| process. | | | | fund calculation assumptions? |
| The following are examples of questions to ask during | | | | - Does the company have any other post-employment |
| the interview of key management staff when | | | | obligations (retiree health care)? What is the projected |
| following the due diligence checklist. | | | | liability? |
| QUESTIONS FOR VP OF HUMAN RESOURCES | | | | - Does the company have a 401K program with |
| Human Resources | | | | matching? |
| - How many people does the company employ? | | | | - Does the company provide profit sharing to |
| - What is the breakdown between PT and FT | | | | employees? |
| employees? | | | | - Is there any other compensation outside of payroll? |
| - Have there been recent layoffs or recent hires? | | | | - Are personal expenses run through payroll or AP or |
| - What are the severance obligations? | | | | both? |
| What's employee turnover? | | | | - How often are employees paid (salary, hourly)? |
| Are employees happy? | | | | - How much overtime is paid to the hourly employees? |
| Has the company had any OSHA claims? | | | | - When are commissions paid? |
| What kinds of insurance does the company provide | | | | - What is the typical payroll amount? |
| for its employees? Is the company self-insured? What | | | | - Is there a collective bargaining agreement in place? |
| is the stop loss per employee (annually)? | | | | - If so, when does it expire? |
| - Is there anyone that is seriously ill? | | | | - When was the last time there was a strike? |
| - What are the premiums? | | | | - What % of employees is unionized? |
| Is there life insurance for any employees (key man life | | | | - How does pay compare to industry average? |
| insurance)? | | | | - Does the agreement prevent sale, merger, |
| Does the company have D&O insurance? | | | | downsizing or other possible action needed to create |
| Is the company self-insured for workers' | | | | viability for the company? |
| compensation? | | | | Conclusion: |
| - If so, what is the stop/loss policy for large claims on a | | | | The due diligence process is very financially oriented, |
| per year and per occurrence basis? | | | | but professionals in legal, tax, human resources, |
| - Who is the annual cost of the stop/loss policy? | | | | insurance & risk, sales and operations are typically |
| - Who is the stop/loss policy from? | | | | involved in the process and responsible for difference |
| - Who is the third party administrator on the policy? | | | | areas of the validation process. Do not take the |
| - Does the company have an L/C to back the | | | | process lightly and do not assume the information |
| exposure under the self-insured policy? If so, how | | | | being provided is correct without a through vetting and |
| much? | | | | analysis to validate the accuracy. |
| - If the company were to get a first dollar policy or one | | | | It takes an experienced, cross functional team to |
| with a reasonable deductible, how much would the | | | | perform due diligence, remember this is also part of |
| annual premium be? | | | | the negotiation process as the final purchase price |
| What is the company's workers' compensation loss | | | | usually is adjusted based on the information from due |
| history over the past 5 years? | | | | diligence. Be sure to ask the right questions, then |
| What is the projected workers' compensation loss for | | | | validate! |
| the year? | | | | |