The law requires every running business to have workers’ compensation, not unless you are self-employed with zero employees on your premises. An employer might consider registering their employees; this is important to everyone working within the environment to be protected against injuries and compensation. Different employees must pay additional premiums based on various factors; therefore, don’t be shocked when you find that people spend less than you do or vice versa. The following are the significant factors that workers compensation organizations use to calculate the amount of premiums different workers will pay:
The Experience Modification Factor
It is commonly known as the Experience Mod; this is a factor that the state or the National Council of Compensation Insurance, depending on the organization’s performance and claim history. It is a complex calculation that involves a particular threshold of losses over a specific period used to determine the organization’s experience and performance. The average set of the industry is 1.0, and if your factor goes beyond this, be sure that your workers’ compensation premiums will increase. However, you can be rated below 1.0 and still be rewarded for the excellent experience as discounts. Another thing to note is that in every point beyond 1.0, expect to pay a 10% increase on the premiums.
What is the size of the company payroll? How are workers classified? The answers to these two questions determine the workers’ compensation premiums each worker needs to pay. All the companies are supposed to complete and return workers’ compensation payroll audits a few months after their policy renewal to ensure it is accurate. Every company involved should be careful in this. If the audit might reveal a higher amount on the payroll than what you previously presented, you will be required to pay the additional amounts that could have increased the premiums.
If you want to improve the experience mod but lower the premiums using the most accessible ways possible, consider reducing the number and severity of your workers’ compensation claims. It doesn’t matter the kind of business you are operating; it is essential to have a safety program, procedures, and policies to help your workers prevent injuries. However, the injury prevention programs vary based on the industry you are in.
Workers are exposed to various work environments; you will find some environments being more dangerous than others. Therefore, employees working in hazardous areas where more injuries are likely to occur can pay higher premiums than employees working in fewer risk areas. This happens because working in a dangerous environment puts you at a higher risk of getting Injured, and thus you might need more money for medication and other expenses.
The bottom line
The various workers’ compensation organizations use almost the same criteria in determining the amount of premiums to be paid by workers. However, this is a basic idea as it ensures that workers are protected and, in case of anything, they are covered if you are working in an organization that does not provide the workers’ compensation. You should consider joining one on your own.