Business

A Helpful Guide To Calculating Workers’ Comp Cost Per Employee

A Helpful Guide To Calculating Workers' Comp Cost Per Employee

According to the Bureau of Labor Statistics, about three million illnesses and injuries occur in the workplace annually.  However, less than 40% of this number file for workers’ comp benefits. If you or a loved one suffer a work-related injury, you need a lawyer’s help navigating the complicated workers’ comp benefits system. 

Workers’ comp is an employer’s insurance coverage that offers cash benefits to employees injured at the workplace. However, determining how to calculate workers’ compensation costs can take time and effort. 

You will need to contact your insurance provider to evaluate the annual premium. With a policy, your insurer can audit your records to check whether you are paying the correct amount depending on the employees you have and the tasks they perform.

If you need further information, you can visit https://cerity.com/how-to-calculate-workers-compensation-cost-per-employee/

How to Calculate Workers’ Compensation Cost

Workers’ comp premiums depend on the risk of claims and the value the employer is insuring. The risk is considered as the potential future costs the company will use for workplace injuries. Calculating workers’ compensation costs requires knowing the annual employee payroll and the workers’ comp insurance rate.

Annual Employee Payroll

The annual employee payroll is available in the records. If the position is new or you dont have records, find a realistic projection for the employee’s yearly pay. Once you find this answer, divide it by 100.

Workers Class Code

The class code of your workers depends on your industry and the roles performed by your employees. These codes represent the risk of injury the employee is exposed to. For instance, someone who works mainly from a desk may be in a different class code than a colleague who spends their time on the field or working with heavy machinery.

State Workers’ Comp Rates

Every state has a board or department that governs the workers’ comp insurance system. The rules regarding this insurance may therefore vary from state to state. For instance, some states may have a limitation on the time up to which an employee can file a claim, the process taken after an accident, and the premium rates calculations

Visit your state’s website for more information on each class code’s annual workers’ compensation rates. Notably, insurance providers consider your accident history to calculate the premium rates. In addition, monthly and annual coverage varies significantly. So ensure to contact your insurance provider to get the correct premium costs.

Once you have these numbers, you are ready for the last step on how to calculate workers’ compensation costs. After dividing the annual employee payroll by 100, multiply the answer by the premium rate for the employee’s class code. 

Your answer is the workers’ comp cost per employee. Therefore, the formula is (the employee’s annual payroll/100) * workers’ comp premium rate for their class code= workers’ compensation cost per employee.

Summary 

The steps above on calculating workers’ compensation costs give you a rough estimate. Therefore, once you find your workers’ compensation cost per employee, compare the figure with that of your insurance provider. This will help you pay the proper amounts for each employee, keeping your business safe when workplace injuries arise.

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