Understanding and applying the following factors that affect workers' compensation costs will help you reduce them. Each job classification carries a different rate based on the job description. Because the differences can be significant, review your classifications and determine if you qualify for the lowest rate for the type of work you perform. Check who handles each job, and minimize the number of employees engaged in activities with higher classification rates. Because some employees perform more than one function, be certain the time is allocated properly to avoid paying the higher rate for time worked.
Most states exclude the premium portion of overtime pay when calculating workers' compensation.
Some states also exclude benefits such as vacation, sick leave, health, life and disability insurance expense reimbursements and employer contributions to retirement benefit plans. Make sure you deduct overtime and benefits when calculating reportable wages. Do not report the full amount of the prevailing wage and fringe benefit payment, just the actual hourly base wage component. Especially important is to review the data used during the annual insurance audit to ensure that the insurance auditor has not charged you for these items. In addition, exclude the excess portion of executive compensation and payroll for officers and directors who waived coverage.