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Commentary

It’s time to revisit payroll calculations used in workers' comp

A simple change would resolve a major conflict concerning bonuses.

By Mark Walls | Updated on August 18, 2014

For as long as anyone can remember, the basic method for calculating workers’ compensation premiums has been RATE x PAYROLL x EXPERIENCE MOD. Rates vary based on job classification codes (which is much more complicated than it sounds), and the experience mod is based on prior losses. This is how premiums have been calculated for years.

This method inevitably leads to a payroll audit at the end of the policy term to determine whether any audit premium is owed. This issue can lead to conflict between the carrier and the policyholder.

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