A: Workers Compensation Insurance is determined by your business’s actual payroll. At the beginning of the term or at the time of your insurance application, you estimate your payroll for the upcoming year. At the end of the term, your payroll is audited to determine what your actual payroll was for the year. If it is more than what you estimated, you will owe more. On the flip side, if your payroll is less than what you estimated, then you will be credited the difference.
There are different payroll class codes that have specific rates. For example, a clerical worker will be rated differently than a truck driver or an electrician. It is important to keep each employee’s payroll separated by job description to ensure you are being rated properly.
Yes. In this case, the owner election of whether or not to cover themselves often determines your insurance company options. Most companies want to have at least one full time employee covered under the policy. If you are electing coverage there are many carrier options and rates depend on your class code, payroll, etc. If the owner rejects coverage, this would be a minimum premium policy (aka ghost policy) issued through the facility. These assigned risk policies often have a minimum of $1200 and are required to be paid upfront. These policies are also audit able.
Generally speaking, each business is assigned a class code. A Class code identifies the type of services being provided by the business. Then each of the employees can be provided a class code based on what duties they perform. Each class code has a factor. The factor is multiplied times every hundred dollars of payroll to calculate a base premium. Then experience mods, owner elections, and previous claim histories can also impact the premium.