Good afternoon one and all! Today I’m going to give you a brief break down of one of the more straight-forward coverages for your business – Workers Compensation. To put it simply, Workers Compensation is in place to pay for expenses due to a work related injury, illness, or death. In addition, it will also replace any income lost if an employee is not able to work due to any of those three things.
Virtually every employer (and employee thereof) is required to partake in Workers Compensation in the state of Pennsylvania (I won’t be covering any information for any other states). It can be purchased by any business in the state – whether through a private company or The State Workers’ Insurance Fund or SWIF. Coverage is written on an annual basis, and is rated based on annual payroll amounts.
Payroll is divided into class codes based upon the type of work that employees perform. When you first write a policy, the class code is initially determined by your agent, and will be confirmed by the PA Rating Compensation Bureau or PCRB. Final determination will be made by the PCRB and will be enforced upon all insurance companies, including SWIF. You can always appeal the class code(s) assigned to your business.
Each class code has a rate, as determined by base rates each company files with the state. Simply put, your WC premium is determined by multiplying your payroll amount (divided by 100) times the applicable rate, and then adding in the PA Employer Assessment (which functions similar to a tax). If you write your coverage through any company other than SWIF, you will also pay a flat Expense Constant.
At the end of each policy term, your policy will be audited – either by your insurance company or an independent auditor hired by your company. Not every company audits every year, but most do. Audits, especially for small businesses, are typically a short form that’s mailed to you to complete and return. The audit is used to determine the actual payroll for the prior policy term (not calendar or business year), and typically requires W2 or other tax form verification. Occassionally, an auditor will actually come to your business to review your information, but it is still often a simple process.
I feel like I’ve bored you enough. Work Comp is generally a very dry, straight forward coverage to discuss. I hope that you stayed awake, and if you have additional questions on how it works, PLEASE feel free to call or email us!
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Anyway, have a good day, and don’t hurt yourself!