Frequently Asked Questions
Workers’ Compensation – Frequently Asked Questions
Workers’ compensation (workmans’ comp) provides benefits to employees who are injured at work. An employee may be entitled to receive wages for lost time and medical care as well as a death benefit.
Business owners in all states (except Texas) are required to carry workers’ compensation based on the number of employees.
Workers’ compensation rates range by job or industry classifications and state filings. The rates are filed in each state and may vary by insurance company. In a few states like Florida and New Jersey the rates are published by the state, which means insurance companies are mandated to charge the filed rates. In most states the rates vary and the insurance companies compete to win business.
Each industry or business has been assigned a classification code for purposes of workers’ compensation. There are approximately 700 class codes throughout the country and the description may vary slightly by state. Typically they are 4 digits except Pennsylvania which are 3 digits.
Example: ABC Plumbing Co. has 2 classifications for their employees, plumbers and office staff. To determine an estimated premium, first, divide the base rate(s) by 100 and then multiply by the estimated payroll.
Each industry or business has been assigned a classification code for purposes of workers’ compensation. There are approximately 700 class codes throughout the country and the description may vary slightly by state. Typically they are 4 digits except Pennsylvania which are 3 digits.
Example: ABC Plumbing Co. has 2 classifications for their employees, plumbers and office staff. To determine an estimated premium, first, divide the base rate(s) by 100 and then multiply by the estimated payroll.
The above example is based on the estimated payroll figures provided by the business owner which means, the premium is also estimated. The actual premium will be determined after the insurance company finalizes a premium audit.
This also demonstrates one of the benefits of choosing Pay As You Go. By paying your premiums based on the actual payroll, you are actually auditing the policy each time you process payroll.
Depending on the insurance company or agent, the most common payment method is referred to as direct bill. This requires a deposit or down payment and monthly installments.
The other option is referred to as Pay As You Go, which reduces or eliminates the typical down payment and allows business owners to pay their premiums based on their actual payroll each cycle.