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Workers’ Compensation Insurance Premiums and “Remuneration”

Workers’ compensation law governs rights and procedures for compensating employees for work-related injuries and occupational diseases. While workers’ compensation law is based largely on state statutes (and thus varies by state) the actual “compensation” under workers’ compensation law is generally based upon, and calculated from, the injured employee’s “compensation.” Most employers procure insurance to cover this potential liability.

NCCI Remuneration Rules

Premiums for such insurance in all but one state are calculated exclusively by applying varying rates to the employer’s total “remuneration” (or compensation). Remuneration has historically included payroll as well as other forms of employee compensation. Most states, however, rely on the National Council on Compensation Insurance (NCCI) to determine remuneration. NCCI’s definition of remuneration includes forms of employee compensation, such as:

  • Salary or hourly pay
  • Commissions
  • Bonuses
  • Overtime pay, less the premium portion
  • Holiday, vacation and sick pay
  • Rental value of employer-provided housing
  • Value of employer-provided meals and lodging
  • Time worked and accrued vacation upon dismissal
  • Piecework, incentive plans, and profit-sharing plans
  • Value of store certificates, merchandise or credits given to employees

Non-NCCI States

Thirteen states have their own government rating bureaus to set premiums and do not exclusively rely on NCCI. Although most of these states apply principles and rules similar to those of NCCI, there may be significant differences in how remuneration is defined. One example is that Pennsylvania and Delaware do not allow exclusion of the premium portion of overtime pay in calculating remuneration.

Possible Employer Actions

The calculations are often based on data from past insurers which is reported to the rating bureau and may be incorrect or incomplete. It can be worthwhile for employers to review the calculation data themselves (or through accountants) to ensure accuracy and minimize premiums. Industry analysts suggest that overcharges for premiums are not unusual and can be recovered if discovered in time.

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