Workers compensation insurance is a crucial requirement for businesses in New York, especially for high-risk industries like construction. Understanding how premiums are calculated can help businesses manage costs and ensure compliance. This article provides a step-by-step guide on how workers compensation premiums are determined for a New York-based general contractor handling carpentry (5403), drywall (5445), and tile work (5348).
Step 1: Determining the Classification Codes and Rates
Workers compensation premiums are primarily based on classification codes assigned by the New York Compensation Insurance Rating Board (NYCIRB). Each trade has a specific classification code and corresponding rate per $100 of payroll. For our general contractor example:
- Carpentry (5403): Involves framing, roofing, and other woodwork tasks.
- Drywall (5445): Covers the installation of drywall panels, including taping and finishing.
- Tile Work (5348): Includes tile and stone installation for flooring and walls.
Each of these classifications has a different level of risk, which is reflected in their individual rates.
Step 2: Estimating the Annual Payroll
Workers compensation premiums are calculated based on the employer’s total payroll for each classification. If our contractor estimates the following payroll for each category:
- Carpentry (5403): $500,000
- Drywall (5445): $400,000
- Tile Work (5348): $300,000
The total payroll for all classifications is $1,200,000.
Step 3: Applying the Manual Rate
Each classification code is assigned a manual rate by NYCIRB. For illustration purposes, let’s assume the following rates:
- Carpentry (5403): $10.00 per $100 of payroll
- Drywall (5445): $9.00 per $100 of payroll
- Tile Work (5348): $8.50 per $100 of payroll
To calculate the base premium for each classification:
- Carpentry (5403): ($500,000 / 100) × $10.00 = $50,000
- Drywall (5445): ($400,000 / 100) × $9.00 = $36,000
- Tile Work (5348): ($300,000 / 100) × $8.50 = $25,500
The total manual premium before any modifications is $111,500.
Step 4: Experience Modification Factor (EMR)
The Experience Modification Factor (EMR) adjusts the premium based on the employer’s claims history compared to industry averages. An EMR of 1.0 means the business has an average claims record, while a lower EMR (e.g., 0.90) results in a discount, and a higher EMR (e.g., 1.20) leads to a surcharge.
If our contractor has an EMR of 0.95, the adjusted premium is:
- $111,500 × 0.95 = $105,925
Step 5: Additional Modifications and Discounts
Other factors can influence the final premium, including:
- Scheduled Credits/Debits: Adjustments based on safety programs, drug-free workplace policies, etc.
- New York State Assessments and Fees: Additional charges for administrative costs and industry assessments.
- Policyholder Dividends: Some insurers offer rebates for low claim activity.
For example, if the contractor qualifies for a 5% safety credit, the premium is reduced further:
- $105,925 × 0.95 = $100,628.75
Step 6: Final Premium Calculation
After applying all adjustments, the contractor’s final premium for workers compensation insurance would be approximately $100,628. However, actual premiums may vary depending on insurer-specific underwriting criteria, payment plans, and other factors.
Why Choose BGES Group for Your Workers Compensation Needs?
If you’re struggling with high workers compensation premiums, claim issues, or compliance concerns, BGES Group can help. As one of the Tri-State area’s top workers compensation specialists, we assist businesses in reducing costs and securing the best coverage.
Our Services Include:
- Premium Reduction Strategies: We help you qualify for lower rates through proper classification, safety programs, and risk management.
- Claims Management: Proactive claims handling to minimize costs and reduce your EMR.
- Compliance Support: Ensuring your business meets all New York State workers compensation regulations.
- Customized Insurance Solutions: Finding the right carrier and policy to fit your specific business needs.
Contact BGES Group Today
If you want expert guidance on workers compensation insurance, BGES Group is here to assist. Contact us today to discuss your coverage needs and discover how we can help you save.
- Website: www.bgesgroup.com
- Phone: Gary Wallach – 914-806-5853
- Email: bgesgroup@gmail.com
Don’t let high premiums and insurance headaches hold your business back. Reach out to BGES Group today and let us find the best workers compensation solution for you!