There’s a lot to consider when buying workers’ compensation insurance in Florida, but cost is an essential piece.
Understanding where to buy, how rates are calculated, and ways to save can help ease the challenges of purchasing coverage.
Read on for what small business owners need to know.
Workers’ Compensation: Florida Rates
As a base rate state, initial insurance rates are mandated by the state of Florida. All insurers licensed to write workers’ comp in Florida must use the rates set by the state’s chosen rating agency, NCCI (National Council on Compensation Insurance). This is important because it means there will be little variation between insurers if you’re price-shopping quotes.
Compared to national averages, Florida rates are moderate: A 2018 study ranked Florida 21st in the U.S., with rates ranging from $1.50 to $1.99. Rates are expressed per $100 in payroll. This means that a policy for a business with $100,000 in payroll will likely cost less than $200 per month.
Florida’s affordable rates for workers’ compensation coverage are due in large part to its designation as a base rate state, as well as rate decreases in recent years. Rates are often changed and lowered statewide, and are based on a variety of factors including reported claims and healthcare costs.
Florida reported a 13.8 percent rate decrease in 2018, and another statewide decrease of 7.5% went into effect in January 2020. Safer workplaces and greater use of automation have decreased workplace injuries, and helped bring down workers’ compensation costs.
But rates are just one piece of calculating your workers’ comp premium. To know your true cost, you also need to factor in class code, payroll, credits and debits.
Recommended Read: How to Get Workers’ Compensation Insurance in Florida
How to Calculate Workers’ Comp Costs in Florida
To find out how much workers’ compensation coverage might cost your business, follow these steps.
1. Determine Which Employees Need Coverage
Most Florida employers must carry workers' compensation insurance in Florida if they employ four or more people. This includes corporate officers and Limited Liability Company (LLC) members. Businesses in construction and agriculture have different employee thresholds.
Keep in mind that full-time, part-time, temporary and seasonal employees are all counted as a full employee.
2. Group Employees and Total Payroll Based on Class Code
How many employees you have may dictate whether you’re legally required to carry insurance, but your premium is based on payroll.
The workers’ compensation rate differs based on the type of work the employees do, and relative risk for injury associated with that work. If you have several employees performing different types of work, they’ll fall under different Classification Codes (a standardized list of industries), and likely have different rates.
In general, physically demanding or accident-prone jobs have higher rates than office jobs. For example, a clothing retail store (class code 8008) might pay $0.78 per $100 in payroll, while a residential carpenter (class code 5645) might pay $1.99 per $100 in payroll, because carpentry is generally more injury-prone than working in retail.
3. Calculate Estimated Workers’ Compensation Cost
The formula for estimating workers’ compensation cost could be summed up as:
(Base Rate x Payroll x Experience Modifier) +/- Credits/Debits = Premium
Let’s break this down.
Because rates are expressed per $100 in payroll, first divide payroll by $100, then multiply that number by the rate for that class code.
Workers’ compensation premiums are calculated based on gross annual payroll, rounded to the nearest thousand. If you’re unable to calculate the exact payroll for the year (for example, if a worker is paid hourly), estimate projected payroll. Actual payrolls are reported as part of the annual audit.
Experience Modifier, Credits and Debits
If you’ve been in business for several years, you may have been assigned an Experience Modifier. This number takes into account your history of claims, and compares it to similar businesses. Depending on whether you are above or below average, you will receive a mandatory debit or credit on your premium.
An Experience Modifier and other credits or debits may also be applied to calculate the final premium. With this in mind, you can contact a broker or agency to discuss the finer details of your company, including the industry and number of employees. This allows them to provide a detailed and accurate quote.
Related Read: How to Calculate Workers’ Compensation Cost Per Employee
How to Control Work Comp Costs
Since all carriers are required to charge the same base rate for coverage in Florida, you don’t gain as much by shopping around for coverage.
However, there are a variety of ways to control workers’ comp costs. These factors still come into play when arriving at your final price.
The most effective way to keep costs low is to maintain a safe workplace and avoid claims. You could also ask about discounts when evaluating your quote. Consider asking your insurance agent about:
- Workplace safety programs and credits
- Owner coverage exemptions
- Deductible options
- Formal training programs
- Formal safety administrative position
- Payment plans and payroll (“pay-as-you-go”) reporting
- Drug-free workplace credits
- Carrier-specific discounts
Need Affordable Workers' Comp in Florida?
If your Florida business is required to carry workers’ compensation insurance, this information should help you secure the right coverage at the best possible price. If you’re ready to start the purchase process, get a free quote from WorkCompOne.