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Workers' Compensation

Workers Compensation

You must insure your employees against on-the-job injuries. With a workers' compensation program your employees are not allowed, by statute, to sue you for on-the-job injury. In return, the you must, as the employer, participate in a system that provides payment to the employee in case of injury for their medical bills and damages. There are many options for workers' compensation coverage. We can help you sort out those options.

Premiums for workers compensation are arrived at by the following formula:

       RATE X $100 payroll X Experience Modifier = PREMIUM

There are two critical variables in the equation: rate and experience modifier or mod.

Every year, California determines the rate for your industry using actuarial calculations. Clerical work is usually the lowest since clerks don't get hurt that much. The construction trades like carpenters and roofers is usually the highest since they get hurt on the job more often and the injuries are more significant.

The MOD is determined by your business's loss and claim history. It is a multiplier on the premium. The average company having an average number of claims will have a mod of 1.0. If your claims history is low it will decrease. If your claims history is high it will increase. If you have a MOD of .90 it is the same as having a 10% discount on your premium while a MOD of 1.10 acts as a 10% increase over the average in your industry group.

Your premium is a multiple applied to every $100 of payroll. If you have a rate of .08 with a MOD of 1.00 you will pay $8.00 of annual premium for each $100 of payroll. If you improve your losses in that year, the next year you may go to a mod of .90, which would reduce your premium to $7.20 on each $100 in payroll.

What can a company do to effect their premium?


  • Safety is the key - Nothing will change your expense on this like a great safety record. The fewer claims and the less significant the claims the less you will pay. Implementing safe workplace procedures including equipment, training, incentives, and clearly written procedures will almost always more than pay for the costs through reductions in the cost of workers compensation premiums.

  • California Programs - You can participate in state programs to improve safety in return for a deduction in the MOD rating. We can help you with this.

  • Review Your Payroll Figures - Payroll calculations are frequently wrong or are not correctly estimated. A outside consultant can review your payroll history which will oftent result in a lower estimated payroll and lower resulting premium.

  • Review The NCCI Classification - Most workers compensation programs have a 30-35% error rating when it comes to business classification. Through carefully determining what each employee group does, you may save very substantial amouns on their rate. Classify all of the employees individually and demand proper classification. In the example above, a clerk classified as a construction worker because he was in the same payroll group can cost thousands in premium dollars.

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