There are two main components to determine your premium:

1.       The work your organization performs; and,

2.       The total compensation you pay.

There are more than 500 industry classifications that describe businesses and industries. Just as these industries are varied, so is the risk related to on-the-job injuries. Consequently, jobs that have a greater likelihood for injury, also have a higher cost associated with the payroll those employees earn. Insurance Rating Bureaus in every state develop rates for each classification by comparing statewide payroll earned to the losses experienced.

If you are an employer with one to two employees, your total premium costs will be lower than an employer with ten to twenty workers. To calculate your premium, we multiply your payroll by the rates developed for your industry.

"My employees perform different duties, does that change their classification?"

Most employees are included under the “operating classification.” The “operating classification” is that classification that describes your business as a whole. For example, a restaurant may have cooks, bakers, servers, greeters, cashiers, bartenders, and general support staff. While the duties of each employee will vary, the enterprise is to operate as a restaurant.

There are two standard exceptions: clerical and outside sales. These exceptions are allowed for individuals whose duties are exclusively clerical or sales. These individuals have no other exposure to the operations of the enterprise and they work in physically separate areas from the remainder of the operations. To find out if any of your employees qualify for clerical or outside sales, please contact your broker.

"What information will I need to prepare my premium report?"

• Payroll records for all employees that detail:

• Gross earnings

• Overtime pay, if any

• Section 125 Cafeteria Plan deductions

• Tips, if any

• Auto, housing, or tool allowances, if any

• Quarterly employment reports such as Form 941 or DE6

• contract/casual labor payments

"What payroll is included in calculating my premium?"

Generally, all types of compensation are included in calculating premium.

The primary items that you can deduct are:

• Premium overtime,

• IRS Section 125 Cafeteria Plan deductions

• Tips

"How do I calculate premium overtime?"
 

Premium overtime is that portion of your employees’ earnings you pay over their normal rate of pay. If an employee is paid $10 an hour for regular hours and $15 for overtime hours, you will deduct the additional $5 from earnings to arrive at Workers’ Compensation earnings. Similarly, if your person is paid $20 for double-time, we would deduct $10 from the total.

        Example:

"Who can I contact if I have questions about preparing my premium report?"

You can speak with any of our Premium Services’ representatives at (415)593-5141

"If I report my payrolls, will I still need a physical audit?"

If your report is properly completed, we will not need to conduct a physical audit. However, a physical audit is required in certain cases. We are required to audit your records if your premium exceeds the state-mandated premium  threshold of $10,000. We will also conduct physical audits on all accounts, regardless of the premium approximately every three years.

"Will my report change my premium?"

Yes; your policy is based on payroll estimates you provided to us at the beginning of your policy. Your report identifies the actual payroll you incurred during the life of the policy. Your payrolls may be higher or lower compared to your estimates. The difference between the estimated and actual payrolls will change your premium.

"Can I be excluded from Workers' Compensation?"

While you are required to provide your employees with Workers’ Compensation, as an owner or partner in your business or an officer in a corporation, you may choose to be excluded from Workers’ Compensation coverage. To find out if you are eligible for exclusion, you need to speak with your broker.

"Do I need to provide Workers' Compensation for independent contractors?"

If you hire an independent contractor, you will need to answer the following questions to determine if they should be treated as an employee:

1. Has the contractor provided you with a certificate of insurance?

   *If the contractor provides you with a current certificate of insurance, you are not responsible for providing Workers' Compensation.
    

2. Do you have a contract?

   *The nature of the contract can help determine if the contractor is independent.  You should review the contract with a Premium Services representative to help evaluate the status of the relationship.
    

3. How much control do you have over the contractor's work?

   *The more you control the process and the outcome of the contractor's work, the greater the likelihood the contractor is an employee and should be included for Workers' Compensation.

The following link “Independent Contractor (Self-Employed) or Employee?” is a great source of information for understanding independent contractor status.

http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

If you use contractors, please contact our office at (415) 593-5141.  We will help you work through these questions to determine your contractor’s status.

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When in doubt please contact any of our highly trained premium services staff.  They will be happy to answer any questions you may have.  If you would like to email your  question to our general premium serves email please do so at premium.services@compwestinsurance.com