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How to Calculate Workers’ Compensation Premiums
Insurance companies use several factors to calculate your workers’ compensation insurance premiums. Some factors that can affect your workers’ compensation insurance cost include your:
- State requirements
- Number of employees
- Tipo de trabajo
- Nómina de Sueldos
- Risk exposure
You can use this formula to estimate your workers’ comp cost:
Workers’ Classification Code Rate X Experience Modification Number X (Payroll/$100) = Premium*
Your classification code rate is determined by the National Council on Compensation Insurance (NCCI) or your state’s rating bureau, and is based on the type of work your employees do. The NCCI also calculates your experience modification number based on your claims history compared to similar businesses.
Remember, this formula is only meant to give you an estimated cost. Obtenga una cotización hoy online or find an insurance agent for a better idea of how much your workers’ compensation costs may be.
Who Pays the Premiums for Workers’ Compensation Insurance?
Employers pay for workers’ compensation insurance. You can get this coverage through a state-run program or a private insurance company. If your business is in Dakota del Norte, Ohio, Wyoming o Washington, you’ll have to get workers’ comp insurance through a monopolistic state fund.
Pay-As-You-Go Workers’ Compensation
Pay-as-you-go workers’ compensation is a convenient way to make your premium payments. It’s not a specific type of insurance, but rather an option for how you pay for your workers’ comp insurance policy. Pay-as-you-go workers’ comp means you pay your premium in smaller amounts that are spread over the course of the year.
With pay-as-you-go workers’ comp, your employees still get benefits if they get hurt or sick from their job. And, instead of paying for your workers’ comp cost in one large payment, you’ll make a smaller payment during each pay period. This means if you hire or lose employees, your workers’ comp cost may change as your payroll changes.
What Are the Benefits of Pay-As-You-Go Workers’ Compensation Insurance?
One of the benefits of pay-as-you-go workers’ compensation insurance is a lower upfront cost, but there are others.
- Eliminates large lump sum payments
- Calculates up-to-date workers’ comp rates each payroll cycle
- Makes the workers’ compensation audit process easier, which can save you time and money
- Improves cash flow
- Ensures you’re paying an accurate premium
Eliminating Large Upfront Workers’ Compensation Premium Costs
We can help you eliminate large upfront workers’ compensation premiums. These premium rates are based on estimates, not your actual payroll. With pay-as-you-go, you’re paying exact premium amounts, which can lower your overall workers’ compensation costs.
Distributing the Cost of Workers’ Compensation Premiums Throughout the Year
Pay-as-you-go workers’ comp helps make budgeting easier for small business owners. Breaking your workers’ comp cost into smaller payments based on payroll can improve your business’ cash flow.
Saving Money and Time with Simplified Annual Audits
When your workers’ comp premium is based on your actual payroll, you’ll enjoy a simplified audit process. This means you can save time and money associated with an audit. Taking a few minutes each month to calculate your pay-as-you-go costs can save hours every year.
What Other Factors Can Affect the Cost of My Pay-As-You-Go Insurance?
Your cost for pay-as-you-go workers’ compensation insurance from The Hartford can vary by state. Let’s look at an example of workers’ compensation costs for a Florida landscaping business using our simplified formula:
Workers’ Classification Code Rate X Experience Modification Number X (Payroll/$100) = Premium**
In 2019 the workers’ compensation rate for Florida landscapers was $8.32 per $100 of payroll.1 Let’s say this landscaping business has three employees who each earn $40,000 a year. And let’s assume the business is new, so it doesn’t have an experience modifier.
That means our estimated workers’ comp premium is:
$8.32 X ($120,000/$100) = $9,984
The Florida landscaping business can make one lump sum payment of $9,984 for workers’ compensation coverage for the year. Or they can make smaller payments with pay-as-you-go, while still getting workers’ comp coverage for the year. And, since payment is based on payroll, the business’ payments can change if employees get hired or leave.
Additional Pay-As-You-Go Deposits and Fees
Since each state has its own workers’ compensation regulations, you should be familiar with your state’s laws. This can help you understand if you need to make a deposit for workers’ compensation insurance.
Tips to Save on Workers’ Compensation Costs
Another factor used to calculate your workers’ comp costs is your business’ safety rating. Increasing security, fire safety or workers’ safety programs can bring your costs down.
Our team of specialists is here to help answer any of your workers’ compensation insurance questions. We will even help find ways small businesses can make your workplace safer. If one of your employees suffers a work-related injury or illness, we’re here to help you through the claims process.
Other Workers’ Comp Considerations
Investing in the right level of coverage for your business and employees is important. When you’re getting workers’ comp insurance, keep these things in mind:
- The industry your business is in and the risks it faces
- The number of employees you’re covering
- The location of your business
Obtenga una cotización hoy or you can call 855-829-1683 to speak to one of our insurance specialists about protecting your business with workers’ compensation.
** This is a simplified calculation for educational purposes only. Actual premium calculations can be more complex. Experience mods are subject to state requirements and do not apply to every policy.