Small business owners know that risk can take many forms. Some companies take a risk to grow, for example, when a painting company also starts to drywall. And, some types of work just have more risk than others. A roofer’s job is usually more dangerous than an architect. In Washington, each company is given one or more risk classes to describe the work that company performs, and the amount of danger involved. Riskier businesses pay more in workers’ compensation insurance, so company owners need to check and make sure that they have the right risk classes.
What is a Workers Comp Risk Class?
A risk class refers to the type of activity a business performs. Each risk class has its own basic insurance rate and this rate reflects the risk of workplace injury or disease with that activity. Rates for dangerous work, such as logging, are much higher than those for low-risk activities, such as clerical work.
See what you pay: Search online for “L&I verify” use the Verify a Contractor tool to look up the risk classes and rates for your business.
Who assigns it and why?
L&I underwriters assign one or more risk classifications based on the nature of business described on your application. These risk classes put your company in categories along with similar Washington state businesses. Your workers’ comp rates are then based on these classes and can change each year depending on the safety performance of your company and others like it.
How does the risk classification impact the employer?
The risk classification is the starting point for calculating your L&I premium per hour. It is important to pay employees in the correct risk class. One contractor in our area accidentally paid all employees under the risk class for exterior framing. But, much of their work should have been paid as interior finish carpentry. The workers’ comp rate for interior work is 60 percent less per hour, so this error cost thousands of dollars each year that it happened.
Check your time sheets: Make sure your time sheets have a place for workers to indicate the proper risk class for each hour worked.
How does the employer pay the right amount of L&I Premium?
As we’ve said, it’s very important to keep accurate time sheets and payroll records, as required by law. In most cases, you will use your workers’ total work hours in order to calculate the premium you owe. If you have no worker hours/units to report, no premium is due, but you must still file an online quarterly report marked “zero hours” or “no payroll.”
File on time, each quarter: You have two options for online filing: Quick File and the Claim and Account Center. Both are at lni.wa.gov/ClaimsIns (click on File a Quarterly Report). They are due the last day of the month that follows the end of the quarter. You will be charged a late fee for late filing.
What if an employer reported the wrong risk class?
If you think you’ve underpaid, it’s probably best to self-report the error. You will need to be prepared for possible penalties and even an audit, but this can be better than having the state discover the error. On the plus side, if you think you have overpaid, L&I will look back three years and calculate a credit for your company once proper documentation has been submitted. Either way, it’s probably best to contact your Approach Retro Coordinator or an attorney before proceeding.
You can see that risk comes in many forms when you are running a business. If you have any questions about risk classes or would like to learn more contact your Approach Retro Coordinator at 800-626-0846.