How is the premium for workers' compensation calculated?

The premium for workers' compensation is calculated primarily based on job class risk and payroll. Each job or occupational classification has a corresponding risk factor that considers the nature of the work and the likelihood of injuries occurring in that field. This classification system reflects the different levels of risk associated with various jobs, such as construction work versus office work.

Additionally, payroll plays a crucial role in the calculation because the overall premium is determined by multiplying the rate assigned to each job class by the total payroll allotted to employees within that category. Therefore, both the risk associated with the specific job duties and the amount of payroll are essential components in determining the final workers' compensation premium.

This method ensures that businesses pay premiums that are commensurate with the actual risks their employees face, along with the financial scale of their operations. It's a more tailored approach than relying solely on either industry averages or factors like employee longevity, company size, or revenue, which do not directly correlate with the risk of workplace injuries.