How to Calculate Workers’ Compensation Cost Per Employee

Streamlined software solutions can help you calculate payroll, find the right plan, and determine workers’ compensation insurance cost for your organization. Most small businesses need coverage, but some may be exempt from workers’ compensation laws. For example, in Illinois, small businesses with at least one employee must have coverage. In Georgia, businesses with three or more employers must carry workers’ comp insurance.

Should this happen, this part of your policy would cover your legal defenses, as well as any judgments or settlements. For example, on the West Coast, both Washington and California have standards for outdoor workers and excessive heat, and Oregon is in the rulemaking process to develop such a standard. When this isn’t possible, work procedures and policies should be put in place to minimize workers’ exposures to hazards and protect them. Worker feedback and expertise are often the best ways to create safe, effective procedures that actually work for those using them. You can purchase a copy of the Scopes Manual by visiting the NCCI online catalog.

Business Insurance

These credits are scheduled and can be subjectively used at an underwriter’s discretion. An underwriter can offer pricing based on unique conditions within a small business, including years of experience, workplace safety training, and work environment. All employers in the same industry with the same functions will have the same classification. These classifications are assigned workers’ comp rates based on the history of occupational risk. This means that in total, you’ll pay 2.16% of your payroll in workers’ compensation premiums. This means that your workers’ comp premiums are based on your employee’s wages before taxes, deductions for healthcare coverage and retirement, and other such deductions.

Every state — except Texas — requires private businesses to maintain workers’ compensation insurance. One is called the Expense Constant, and it basically compensates your insurance company for the cost of administering your policy—every workers’ compensation policy has one. You might also see a few miscellaneous fees that are required by law (such as the state surcharge or terrorism surcharge). Additionally, in most instances, a workers’ compensation insurance policy includes employer’s liability insurance. This coverage protects your business when an employee sues over a work injury or illness.

Here’s how to calculate your workers’ compensation premium

When calculating your annual payroll amount, be sure to base it on the gross wages of your employees. That can be a bit confusing, so we will demystify it for you below and also cover how to calculate your workers’ compensation cost per employee. After you run your payroll, you can look up your class code, which can help you find your rates. These rates will give you an estimate but won’t be your exact workers’ comp quote.

There are nuances regarding the factors that go into a workers’ compensation cost calculator. These include the state you’re in, the size of your business’s payroll, and the jobs that your employees perform. In Illinois, a workers’ comp settlement amount is calculated based on the employee’s average weekly wage and the extent of their injuries. Typically, the amount is determined by how much will be paid per week, multiplied how to calculate workers comp cost per employee by 60% of the worker’s average weekly wage, up to the state max. An injured worker who files a workers’ compensation claim can receive weekly benefits if they’re unable to work, as well as money to pay for any medical care they need as a result of their injury. Workers’ comp combined with general liability insurance and professional liability insurance can help to ensure your business is ready for whatever may come your way.

How do injured employees file a workers’ compensation claim?

Instead of doing all that work, business owners can also choose to access workers’ comp plans within QuickBooks for a streamlined experience. With QuickBooks Payroll, you can set up payroll, learn state requirements, and get a free insurance quote. Once you fill out your free quote form, their broker, AP Intego, will contact you to discuss your plan options. From there, all you have to do is pick a workers’ compensation insurance policy.

Depending on where you live and operate, you can get workers’ compensation insurance through private insurance providers or state-funded programs. If you choose to get it through private insurers, you can go directly to an insurance company, insurance agent, or broker. Due to the higher salary and higher index rate of the mechanic, the cost of their workers’ compensation coverage is much more expensive. In total, Ken’s Motorcycle Shop will pay $431 for a workers’ compensation policy.

But to begin with, check out our workers’ compensation calculator. The National Council of Compensation Insurance (NCCI) sets and oversees class codes for 35 U.S. states, plus the District of Columbia, and you can look those up on the NCCI website. The rest of the states are overseen by independent bureaus or are monopolistic, meaning the state sells and oversees comp coverage.

• When calculating your annual payroll amount, be sure to base it on the gross wages of your employees.
• One of the biggest mistakes that causes companies to pay higher workers’ comp premiums is overstating their payroll.
• Overexertion is the most common cause of work-related injuries according to a Travelers Insurance analysis of 1.2 million workers comp claims.
• Complete our easy online application to get free insurance quotes.
• As the formula above shows, workers’ compensation premiums are calculated in part by total payroll multiplied by the insurance rate for that class of work.

Now that you know how workers’ comp is calculated, you can figure out how much you will need to pay. You’ll simply divide your annual payroll by 100, multiply it by your class code rate, and multiply it again by your MOD. You may be wondering whether to calculate workers’ comp on annual or gross wages.