Why Job Descriptions Matter for Workers’ Compensation

Purchasing workers’ compensation insurance is a fact of business life for most employers. Since virtually every state mandates companies to carry some form of worker’s compensation protection, business executives must work to find the best, most affordable worker’ compensation programs they can. In calculating premiums, insurers rely on job descriptions. Employers that fail to devote sufficient time and thought to correctly classifying jobs often pay higher premiums.

Calculating Premiums

To determine how much a company should pay for worker’s compensation coverage, most insurers use a formula. While the specific calculations of the formula vary from insurer to insurer, most rely on the following three criteria:

  • Audited Payroll Numbers
  • Job Descriptions
  • Modification Factors

The rate a company pays often depends on what job description most employees have. Since descriptions that are riskier require higher premiums, employers typically want to classify jobs properly to avoid overpaying.

Finding the Descriptions

In most places, the state regulatory agency can provide employers with a list of job descriptions. Since some of the job titles are broad, smart employers rely on experienced workers’ compensation brokers to help them determine what descriptions best fit. Then, these brokers help company executives shop for workers’ compensation programs tailored to a business’s needs.

Given the importance of job descriptions in calculating workers’ compensation premiums, employers must define work appropriately. If they don’t, they might pay too much.

 

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