Running a business is no easy feat. Especially, when you have to think about things like employee payroll and workers compensation coverage.
Workers compensation pricing is based on several factors. The main factors involved are the classification code of employees, and the net employee payroll over the annual duration of the policy.
The classification code is governed in California by the Workers Compensation Insurance Rating Bureau (WCIRB). They assign standardized classification codes to job duties based on the risk of injury for that specific job.
For example, the classification for a clerical (or desk job employee) is 8810. The odds of a clerical employee getting injured while at work is quite low, so the WCIRB assigns a low recommended rate to charge for their coverage ($0.35 per $100 of payroll as of January 1, 2018).
On the other hand, take a roofer employee into consideration (class code 5552). Somebody that is working up high on a roof is far more likely to be injured on the job, and if injured, it’s likely that the injuries are more severe than most other workplace injuries. Therefore, the recommended rate for a roofer is $28.57 per every $100 of payroll. In other words, roofing employers can expect to incur a Workers Compensation cost of almost 30% of their payroll for certain employees. That is a very large expense for any business.
That being said, it’s very important for employers to notify their insurance agents of fluctuations in payroll during the policy period. This will help business owners better manage their expenses and avoid any serious audit “surprises” at the end of the policy term.