As an employer, there are several vital pieces of information you need to know about workers’ compensation insurance before partnering with an insurance agent. Allow us to explain how the cost of your workers’ compensation will depend on your annual payroll, employee class codes, experience modification factor, coverage options, and the requirements that need to be met in Georgia.
1. Cost Calculation Based on Annual Payroll
To ensure your workers’ compensation is being rated accurately, you will have to declare how much annual payroll you will be paying your employees in the upcoming year. It’s vital to declare an honest, accurate amount, as your annual payroll will be audited at the end of the policy term and, if you misrepresent the actual figures, you could be on the hook for a large audit bill. To give the most accurate number, you should identify the payroll amounts associated with your employees’ wages, salaries, overtime, and bonuses.
2. Employee Class Codes
While determining which workers compensation policy you need, your insurance agent will decide which class code best represents the work being done by the employees of your company. These are 3 or 4-digit codes that correspond to the description of the type of work your employees do and the risk associated with it.
For example, an office employee who works at a computer all day has a lower amount of injury risk than a construction worker who works with heavy machinery. Therefore, these two employees would have different workers compensation class codes. Clerical or office employees are generally classified under class code 8810.
3. Experience Modification Factor
The experience modification factor directly relates to how safe your workplace is and how many workers’ compensation claims you have had to file in the past. This factor is determined by several variables; such as, actual payrolls and loss incurred during the last several years, and is calculated by the National Council on Compensation Insurance (NCCI). If your experience modification factor is above the industry average (which is 1.0), your workers’ compensation premiums will generally be higher. If your experience modification factor is less than 1.0, you will be able to receive a discounted premium from your insurance carrier.
4. Coverage Options
Some companies may need higher limits of liability or endorsements added to their policy, based on their specific needs and the requirements placed on them by their customers or vendors. Your insurance agent will let you know which options are available and answer all your questions. It’s important to understand the coverage you have in place so be sure you have an agent that can walk you through your coverage options.
5. Requirements That Need to Be Met in Georgia
If you have three employees or more (including owners/officers), you will need to have workers’ compensation. According to the State Board of Workers’ Compensation,
“Georgia requires most employers with three or more full time, part time or seasonal employees to have workers’ compensation insurance. If the business is incorporated or an LLC, the corporate officers or members are included in the three or more employee count regardless of whether they exempt themselves from coverage.”
If you and your officers elect to be included in the coverage of your workers compensation policy it will affect the policy premium. The insurance company will charge a minimum annual payroll based on the type of work you and your officers do for the company. However, you may elect to be excluded from coverage when the policy is issued, and no payroll would be charged on the policy for the owners and officers. A signed officer exclusion would be needed for any officer rejecting coverage under the policy.