Workers’ Compensation: A Quick Reminder

Every state has its own laws and nuances when it comes to workers’ comp. However, the overriding general guideline is that if a company has an employee, it must (or is highly encouraged to) carry workers’ comp. State laws aside, an employee will expect a certain level of care from their employer should they get injured on the job. If workers’ comp isn’t there to step in, the employer could be at risk of a potential lawsuit.

When it comes to the insurance companies, there are two primary things they look at: payroll and job classification. Payroll, in conjunction with its associated job classification, is how workers’ comp is rated and ultimately yields the premium you pay for the coverage. A universal practice in workers’ comp is to have each policy period audited at its expiration to verify payroll and job class in relation to what was reported at its inception.

If the payrolls and classes at the end of the policy term differ from those at the beginning, that will affect the premium, because it will show whether or not a company underreported or overreported its exposure. Depending on which is the case, a company could be billed for additional premium or credited back a portion of their premium. Therefore, it is always prudent to check in on your payroll estimates every 3–4 months to make sure you’re tracking with your initial estimates.

Adjusting during the policy term will stave off potential audit premium owed at the end of the policy year.