Workers Compensation is a type of insurance that protects the Employer from losses incurred due to injuries experienced on the job by Employees.
Is Workers Comp Required?
In most States Workers Compensation is required by law. There are a few State’s which allow either no coverage, or if you are under a threshold to “elect” to not cover Workers Compensation. This does not “waive” the financial responsibility of the Employer in the case of injury.
“Most States require Workers Compensation Insurance. Failure to have Workers Comp can mean big penalties and financial loss if someone gets hurt on the job.”
I Don’t Have Workers Comp What Can Happen to Me?
In some States failing to have a Workers Compensation policy can mean jail time and or steep fines. Jail aside (because that isn’t bad enough), if your Employee gets hurt on the job and you do not have a Workers Compensation policy, you will be held financially responsible for all of the Employee’s losses including missed work time. Dont put your business at risk, contact us today to get started.
Where Can I Get a Policy?
For the majority of Employers, they can get a Workers Compensation policy by contacting a licensed Insurance Agent. PRS Insurance & Benefits can assist you in getting quotes and finding a policy that is right for you.
For other Employers located in North Dakota, Ohio, Washington, Wyoming, Puerto Rico and the U.S. Virgin Islands, they must purchase insurance through the State. These States are known as Monopolistic and they do not allow Employers to purchase private insurance. Contact us to get a free quote.
“Employers can get a workers compensation policy through insurance brokers. Contact Payroll Services today to get started.”
How is My Workers Compensation Cost Calculated?
Workers Compensation is based off of two items: Total Payroll Wages and Rate per $100 per Class Code.
Each “task” or “position” in your business has a defined class code which indicates the level of risk (rate) that position holds. For example an office worker (admin class code 8810) is considered a low risk position and the rate is low because of that rate. A carpenter (class code 5403) has a higher rate because he works in a more dangerous environment.
To understand the cost of Workers Compensation and how to “price” the insurance between carriers, let’s use the example below.
Agent ABC Quotes $100,000 in wages for class code 8810 at a rate of .18 per $100
$100,000 / $100 = 1,000 units of Workers Comp
1,000 units x .18 (rate per $100 for 8810) = $180.00 annual premium
PRS Insurance & Benefits quotes $100,000 in wages for class code 8810 at a rate of .14 per $100
$100,000/$100 = 1,000 units of Workers Comp
1,000 units x .14 (rate per $100 for 8810) = $140.00 annual premium
Looking at the example above, we can see that Employers should shop the rate per $100 and not the total premium. Since that “amount of total wages” can change so can the total premium. If you asked for a quote for $200,000 in wages, the total premium will be much less than if another agent quoted you for $100,000 in wages. The $200,000 wage quote may actually be cheaper though. As an Employer you should shop the rate not the total premium. Contact us to check your rates.
“Workers Compensation should be shopped by the “rate” and not the total premium.”
“Pay as you Go Workers Compensation improves cashflow, eliminates down payments and prevents big year end swings in premium.”
What is Pay as You Go Workers Compensation
To understand Pay as You Go Workers Comp, Employers need to understand how traditional Workers Comp is billed. When an Agent provides a quote, this is based off an estimated amount in wages. Employers have to – guess – at what they think the total wages for the year will be. The Employer then has to pay a down payment, and make monthly or quarterly installments throughout the year. At the end of the year, the Employer goes through a Workers Compensation Audit to reconcile the estimated total wages given at the start of the year with what actually happened. Most times this results in a bill to the Employer (a rather large one).
Pay as You Go Workers Comp removes the estimate , down payment and surprise bill at the end of the year. With Pay as You Go Workers Comp, the Employer is billed a portion of the premium each payroll cycle based on actual wages paid. At the end of the year an audit is still done, however since the Employer has been reporting actual wages, there is no surprise bill. Payroll Services provides this as a free service to all Clients. Contact us to start your pay as you go workers comp.
“Workers Compensation Audits are normal and reconcile the actual wages paid with the estimated wages.”
What is the Workers Comp Audit
A Workers Compensation Audit simply ensures that the wages reported to the Insurance Carrier is the correct wages paid throughout the year. Most Workers Compensation Audits require 4 quarters of 941s, 4 quarters of State Unemployment returns, and a report that shows total wages by class code for the policy period. If you are a contractor, then you will be required to submit additional documents such as a general ledger from your accounting systems showing all subcontractors paid. Payroll Services provides Workers Compensation Audit support.