What is the Correlation of Workers’ Compensation and Payroll?
Workers’ compensation insurance protects employers from claims resulting from injuries to employees. It protects your business from lawsuits and provides employees with compensation for on-the-job injuries.
By law, most employers are required to provide coverage for lost wages and medical bills incurred as a result of on-the-job accidents or illnesses. For many businesses, workers comp coverage is the largest part of its expense.
These are a few factors in determining the workers’ compensation premiums: your company payroll, the type of work employees do, the state in which your business is located, and your workers’ compensation claims history.
To estimate the workers’ compensation cost, your insurance provider normally uses this formula: Total Annual Employee Payroll/ 100 X Workers Compensation Rate= Estimated Compensation Insurance Cost.
What Payrolls are subject to workers’ compensation?
According to National Council on Compensation Insurance NCCI here is the list of the inclusions and exclusions for payroll.
Inclusions in payroll for Workers Compensation Insurance
- Payroll – Wages or salaries including retroactive wages or salaries
- Overtime Pay
- Pay for holidays, vacations, or periods of sickness
- Employer payment into statutory insurance and pensions plans
- Payment for piecework, profit-sharing, or other incentive plans
- Payment, compensation, or allowance for tools used in work
- The rental value of apartment or accommodation provided for an employee
- Value of other lodgings as part of pay
- Value of meals received by employees as part of their pay
- Value of store certificates, credits, merchandise, or other money substitutes received
- Payments for salary reduction, employee savings plans, retirement, or cafeteria plan
- Davis-Bacon pay or pay from other prevailing wage law
- Annuity Plans
- Expense reimbursement to employees where employer records do not indicate a valid business expense,
- Payment for filming commercials excluding residuals
Exclusions in payroll for Workers Compensation Insurance
- Tips and other gratuities
- Employer payments to group insurance or group pension plans
- Employer payments into third party trusts for the David-Bacon Act or similar prevailing wage law qualified trust
- Value of special rewards for individual invention or discovery
- Dismissal or severance payments except for time worked
- Payments for active military duty
- Employee discounts on items purchased from the employer
- Supper meal payments for late work
- Uniform allowances
- Perks such as airplane flights, club memberships, incentive vacations and etc
It is noteworthy to mention that workers’ compensation laws vary by state, so
, and to review your company description with your insurer.
At Klinger Insurance Group, we are equipped with years of experience in handling various businesses, we can ensure that your business meets your state’s regulations and provide for your workers’ needs. We also ensure that our clients receive the most cost-effective, comprehensive coverage at the best possible rates. Talk to our insurance advisor today at 301-428-4935 or e-mail us at email@example.com or visit our website at www.klingerinsurancegroup.com/. Click here to get a free quote e for your workers’ needs.