Worker’s compensation is an insurance policy that provides financial benefits to employees who suffer work-related injuries or illnesses. The cost of worker’s compensation varies depending on several factors, including the type of industry, the number of employees, and the safety record of the company. In this blog post, we’ll take a closer look at how much worker’s compensation costs.
Factors that Affect Worker’s Compensation Costs
There are several factors that affect worker’s compensation costs, including:
- Industry: Some industries have higher rates of work-related injuries and illnesses than others. For example, the construction industry has a higher risk of workplace injuries than the health care industry .
- Number of employees: The more employees a company has, the higher the cost of worker’s compensation insurance. This is because there is a higher risk of workplace injuries and illnesses with more employees.
- Safety record: A company with a good safety record will have lower worker’s compensation costs than a company with a poor safety record. This is because the risk of workplace injuries and illnesses is lower in a company with a good safety record.
- Location: Worker’s compensation costs can vary by state. Some states have higher premiums than others due to differences in workers’ compensation laws and regulations.
How Worker’s Compensation Premiums are Calculated
Worker’s compensation premiums are calculated based on several factors, including:
- Industry classification: Each industry has a unique classification code that is used to determine the rate of worker’s compensation insurance. For example a Landscaper may pay around $2.00 for every $100 in payroll, and a roofer may pay $12.00 for every $100 in payroll.
- Payroll: The amount of payroll paid to employees is used to determine the cost of worker’s compensation insurance. The higher the payroll, the higher the cost of worker’s compensation insurance.
- Claims history: The number and severity of claims made by a company can impact the cost of worker’s compensation insurance. Companies with a higher number of claims or more severe claims will pay higher premiums.
- Experience modification factor: This is a factor that adjusts the premium based on a company’s claims history. Companies with a good claims history will have a lower experience modification factor, which will result in lower premiums.
- Location: As mentioned earlier, the location of a company can impact the cost of worker’s compensation insurance due to differences in workers’ compensation laws and regulations.
The Cost of Worker’s Compensation
The cost of worker’s compensation varies depending on the factors mentioned above. According to the National Academy of Social Insurance, the average cost of worker’s compensation was $1.28 per $100 of payroll in 2019. However, the actual cost of worker’s compensation can vary widely depending on the industry and the state.
For example, the cost of worker’s compensation insurance for a construction company in California could be much higher than the cost for a healthcare company in Minnesota due to differences in industry classification and state regulations.
Worker’s compensation is an important insurance policy that provides financial benefits to employees who suffer work-related injuries or illnesses. The cost of worker’s compensation varies depending on several factors, including industry, number of employees, safety record, location, and more. Understanding how worker’s compensation premiums are calculated can help companies better manage their costs and ensure that they have adequate coverage in place.