So, you’re an employer trying to understand Worker’s Compensation premiums. It can be confusing; what factors go into the calculation? How is your company’s premium determined? Well, we’re here to help clear it up. Read on for a breakdown of the factors that impact Workers Comp premiums and how your company’s rate is calculated.
By the Type of Business
Your business type is one of the primary elements determining your workers’ compensation premium. The rates are further defined by how much payroll you have, your company’s history of claims, the type of work your employees do, and the state where you do business. For example, a roofing contractor will have a higher rate than an office-based business because there is a more significant potential for on-the-job injuries.
Businesses with a history of claims also will pay higher rates than those without such a history. In most states, employers must provide workers’ compensation insurance. This insurance covers medical expenses and income replacement if an employee is injured. Workers’ compensation insurance premiums are paid by employers and are not deductible as a business expense. Employers also are not allowed to recover these costs from their employees.
By Your Workplace Accidents History
Nobody wants workplace accidents. They’re bad for business, they cost money in workers’ compensation claims, and they can damage your company’s reputation. But did you know that your business’s history of workplace accidents is a primary element in determining your workers’ compensation premiums? That’s right; insurers will look closely at your company’s accident history when setting your rates.
Fortunately, you can do a few things to keep your rates down. First, make sure you have an effective safety program in place. This should include regular safety training for all employees and procedures for reporting and investigating accidents. Second, keep good records of all accidents, even if they don’t result in a workers’ compensation claim. Finally, work with your insurance agent to ensure you’re getting the best possible rate on your coverage. By taking these steps, you can help keep your workers’ compensation costs under control.
By Total Payroll Of Your Business
The total payroll of your business is one of the primary elements to determine your workers’ compensation premiums. The payroll includes the cost per employee for covered wages, salaries, commissions, and bonuses. If an employee is paid hourly, their remuneration is multiplied by the number of hours worked during the policy period; if salaried, their entire salary is used as the covered wage.
Note that some states require fringe benefits like health insurance and retirement plan contributions to be included in the covered wage base; in those cases, the entire cost of those benefits would be added to the payroll calculation. Workers’ compensation premiums are all about risk management; the greater the total payroll, the greater likelihood that an employee will suffer a work-related injury or illness and thus make a claim under the policy.
With that in mind, businesses should strive to keep their total payroll as low as possible to minimize risk exposure. By carefully managing their payrolls, companies can control their workers’ compensation costs and ensure they are only paying for the coverage they truly need.
Computing your Business’s Insurance Premium
To calculate your business’s insurance premium, we assess your company’s classification and accident history. Then, we apply a rate that considers all that information. Finally, we multiply the speed by your total payroll. Occasionally, when your policy is about to end, your insurance company will do a premium audit to see if anything in your business has changed and how that would affect your workers’ compensation premium.
Worker’s Compensation Premiums – In Conclusion
Most employers are required to have workers’ compensation insurance. This protects the employer and employees from a work-related injury or illness. The more hazardous your business is, the higher your rates will be. You may be able to lower your rates by implementing safety measures such as drug testing, safety training, and injury prevention programs.
If you have any questions about determining your premium, check our website, and remember, even if you aren’t required to have coverage, it’s still a good idea to protect your business and employees with workers’ compensation insurance.
