Here at SAIF, we're pretty sure that workers' compensation isn't your top business priority. (That's our job, not yours.) But keeping us up to date with changes to your payroll is a small act that can help both of us. In the same way that you call your insurance agent when you add a new car to your auto insurance policy, or when you add a member to your health insurance, it's important to keep us updated about changes to your estimated payroll for workers' compensation.
If you forget or put it off, it could impact your bottom line. You could be paying too much, or you could be surprised with an upward adjustment to your premium during a premium audit. Either way, you'd probably rather know just how much you will owe when it is due.
As sure as life happens, so do payroll changes. You may hire someone new, or perhaps let someone go.
There are four typical scenarios in which employers make changes to their business that affect their premium payment:
- You hire additional staff.
- You make reductions in staff.
- You change the responsibilities of an employee.
- You take on a new venture in your business.
- "How could it impact my bottom line?"
How could it impact my bottom line?
If you are on our SAIFPlus installment pay plan, your insurance policy begins with an estimate of what your annual payroll will be for the next year, and your premium is based on that amount.
If you hire additional staff and don't notify us, you are probably not paying enough, and you will owe additional premium when your policy is reconciled.
If you reduce the size of your staff and don't notify us at once, you are probably paying us more than you should.
If you change the responsibility of an employee to a higher- or lower-risk job, your premium will probably change accordingly, and you could be over- or underpaying your premium unless you tell us.
If the nature of your business changes, resulting in a new class code for your business, your premium will change accordingly, and you could be over- or under-paying your premium unless you tell us.
4 TRUE STORIES of payroll discrepancies
A residential construction contractor had experienced a drop in payroll but neglected to inform us. We were billing the company almost $30,000 in premium, but an audit revealed that the actual payroll warranted a premium of less than $8,400. The company surely could have used the cash earlier.
Credited $21,600
We were billing another construction firm a premium of approximately $19,400. However, because of a reduction in workforce, its premium should have been just more than $5,100.
Credited $14,300
A fruit and nut farming operation was paying about $38,000 based on estimated payroll; however, it increased its payroll by 58 percent and didn't tell us. Based on actual payroll, the premium was adjusted upward to $66,500.
Owed $28,600
A logging company was paying nearly $14,000 in estimated premium, but based on its actual payroll, its premium was about $39,000. Lacking a line of credit, the company needed a payment plan to pay the balance.
Owed $25,000
(Reprinted from Comp News, Spring 2010)