by Burke Brown   Payroll Experts, Inc.
Workers’ compensation for many businesses can be confusing and at times a headache, one way Payroll Experts has simplified this is through our pay-as-you-go workers’ compensation.  This helps reduce audit exposure because it is tied to actual payroll numbers.  It also eliminates the need to estimate wages as it is a direct reflection of the actual numbers of each payroll.

As I meet with different businesses I am often asked about workers’ compensation so I want to address a few of the most common questions.  Rules do vary by state, but following are some of the most frequently asked questions I receive:

What is workers’ compensation and how do I know what my premium will be?  Workers’ compensation is insurance that provides medical help and wage replacement if an employee is injured at work or performing work duties.  Your workers’ compensation premium is based on wages and your classification code (what type of work you are in).  You are assigned a rate per $100 of wages based on what type of business you are in.  For instance if your rate per $100 is 1.25 and your annual payroll was $100,000, your annual premium would be $1,250 (100,000*1.25/100).

What’s the difference between workers’ compensation and unemployment?  Workers’ compensation is insurance for an employee injured on the job, whereas unemployment is compensation through a fund for people who are not working.

Do I need to have workers’ compensation and who is covered?  Workers’ compensation is required of all businesses regardless of industry.  This is where the classification codes come in.  If you have a staff of office employees, the rate will be less than a staff of roofers, because of the increased risk of getting injured on the job.
Typically, an owner of the business may elect to not be covered by workers’ compensation depending on the state.

One misconception is if a company uses independent contractors they don’t need workers’ compensation.  Be careful with this and verify they have their own workers compensation policy, otherwise you could still be held liable.

What pay is used in figuring my premium?  Wages, including holiday, vacation and sick time are included in workers’ compensation when figuring your premium.  Tips may be excluded depending on the state.

Can my employees work in different classification codes?  Typically you are not able to break an employee’s wages into different class codes but under some circumstances you may be able to.

Example: You are a fast food restaurant, you typically would have one classification code and all your employees would fall under that even if they work the register and never do any cooking.  However, if you are in a manufacturing company you may have multiple classification codes and an employee who spends part of his time in one function and part in a different function may be able to break out the different wages and be in different classification codes.

Workers’ compensation for many businesses can be confusing and at times a headache, one way Payroll Experts has simplified this is through our pay-as-you-go workers’ compensation.  This helps reduce audit exposure because it is tied to actual payroll numbers.  It also eliminates the need to estimate wages as it is a direct reflection of the actual numbers of each payroll.

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