Is There Really A Workers Comp Tax?
A Workers Comp tax is something that many people in Human Resources and Accounting Departments have to consider overall.
The subject of a Workers Comp tax comes up each year as today is the end of our tax filing season. I always try to write something on premiums being viewed as a tax this time of year. The postman just picked up all of our tax forms (whew!).
Are Workers Comp premiums a tax? The main consideration is how the employer views the payouts. It is shocking to me (hence the title) that employers still just cut the check with so many areas of assistance available.
If a company or organization considers premiums just a cost of doing business, then it is nothing more than a percentage of the payroll tax. This is a big mistake and one of the reasons this article and blog have been written for almost 10 years.
In fact, as a Chartered Financial Consultant (ChFC) I view Workers Comp premiums as an investment. My analyses looks at the premiums as a zero-based investment. If a company is just cutting checks then they have given up on any types of cost savings that are available.
One of our old slogans is/was “Stop just cutting checks.” At least read your Workers Comp policy and premium audits as a beginning to analyzing how your company is faring with your WC budget.
The simplest way to start reducing Workers Comp is with a general safety plan. A claim is a loss. Once a claim occurs the only strategy left is to reduce the costs, which we have specialized in for over 20 years. The old and true saying is a claim that never occurs will always be the largest cost reduction – plain and simple.
Your Third Party Administrators or carriers usually have an endless amount of information on cost savings. If not, there are free organizations such as the North Carolina Safety Conference that provide free or low cost safety training.
Other Incentives For Safety To Avoid Workers Comp Tax
One of the main incentives to cut costs with a safety program is the Schedule Rating Factor. An example of a Schedule Rating chart is here. Notice many of the cost reductions are directly related to safety.
A Workers Comp tax does not exist on paper. It usually exists in boardrooms, C-Level executive offices, and in the safety and risk management departments.
©J&L Risk Management Inc Copyright Notice