Question: How is workers’ compensation premium calculated?

The premium paid for a workers’ compensation policy is based off of the employee payroll of the insured’s business. As discussed on the workers’ compensation policy page, there are a few steps in calculating the final premium:

1. First, the manual premium is calculated by multiplying the total remuneration (in $100 units) in each classification code by the current rate established by the state government for that class code. Any policy endorsements, such as waivers of subrogation, will be added to the manual premium. If there is a change in policy limits, then this effect in the premium is also added.

2. After the manual premium is computated, it is then mulitiplied by the experience modification rate. This has a tremendous effect on the overall workers’ compensation premium and it is important for business owners to understand their experience modifier and keep it as low as possible.

3. There are then three premium credits available to Florida businesses that are deducted from the current premium to get the modified premium for the policy. These three credits are the Safety Credit, the Drug Free Credit, and the FCCPAP.

4. There are three other adjustments made to the premium. These are the Premium Discount, Expense Constant ($200 in Florida), and the fee for terrorism. After these three adjustments have been made to the premium, the remaining figure is known as the “Total Estimated Annual Premium”. This is the premium amount that is actually billed to the employer throughout the policy year.

5. Each workers’ compensation insurance policy will be audited to determine the actual payroll during the policy period and the final adjustments will be made to the premium. If the employer has a higher remuneration than anticipated at the beginning of the year, then there will be an increase in the premium during the audit. It is important as a business to keep track of any payroll changes during the policy year to avoid this situation.

6. Some insurance carriers offer incentives to attract larger employers and keep claims down during the policy year, such as dividend plans, retrospective plans, and retention dividend plans. These are designed to return premium to employers that have controlled their losses during the policy period.

Question: What classification codes and workers’ compensation rates apply to employees at my jewelry business?

There are two classification codes that could apply to your jewelry business depending on the nature of your business. You can read more about these Florida workers’ compensation codes below:

8013 - This classification code applies to jewelry stores, whether wholesale or retail or a combination of both. These stores are principally engaged in selling precious or costume jewelry, such as necklaces, earrings, bracelets, rings, watches, charms, lockets, pendants, brooches, and similar ornamental items intended for personal adornment, whether made of metals or other materials. In addition to jewelry, this classification includes the minor and incidental handling of miscellaneous non-jewelry merchandise, such as silverware, tableware, clocks, chinaware, glassware, trophies, small electrical appliances, giftware and leather goods. Risks engaged in cutting or polishing precious stones, such as diamonds, emeralds, rubies, and sapphires, are included within the scope of this classification along with the repair or engraving of jewelry and precious stone setting when performed by a retail jewelry store for individual customers. The Florida rate for this classification in 2007 was 0.85 and in 2008 it is now 0.79 dollars for every 100 dollars of remuneration.

3383 - This classification code is assigned to insureds engaged in the manufacture of jewelry such as rings, bracelets, earrings and other jewelry of precious metals with or without precious stones and mountings for precious stones. Precious and non-precious metals, precious and semiprecious stones, plating solutions, enamel and lacquer are received from others. The operations may include melting, pouring and rolling of the metal, or such operations may start with sheet stock. Further operations involve blanking, forming, drilling, assembling, buffing and polishing. Some articles are plated, enameled or lacquered. Stones may be set in the finished mountings. It also includes businesses engaged in the manufaturing of watch cases, gold leaf in booklets, silverware such as silver or silver-plated flat and hollowware, picture frames, ornaments and novelties, and metal musical instruments such as cornets, trombones, French horns, bass horns, and others. The Florida rate for this classification in 2007 was 1.91 and in 2008 it is now 1.51 dollars for every 100 dollars of remuneration.

If you would like more information about either of these classifications or information on how your own employees should be classified, please do not hesitate to contact our office or request a workers’ compensation quote online.

Question: What classification codes and workers’ compensation rates apply to employees at restaurants?

There are four main classification codes used to categorize restaurant employees for workers’ compensation exposures in Florida. Caterers can be assigned to the appropriate restaurant classification based on the nature of their operations and depending on which classification they are most similar to when they serve the food at the client’s location.

9058 - This classification code is applied to all restaurant employees under the direct management of hotels, motels, motor courts and tourist courts or cabins. A restaurant that is operated by an insured who is not involved in the above-mentioned businesses is classified to the appropriate restaurant classification listed below, even if the restaurant may be located on the premises of a hotel, motel, etc. Restaurant operations are a normal adjunct to these establishments and they usually cater to the general public as well as guests of their facilities. Employees engaged in food and beverage preparation and service at apartment hotels, dude ranches and rooming or boarding houses also fall within the scope of this classification. This classification also includes musicians or entertainers, hostesses, bartenders, waiters, waitresses, cashiers, cooks, busboys, dishwashers and restaurant managers. The Florida rate for this classification in 2007 was 3.02 and in 2008 it is now 2.60 dollars for every 100 dollars of remuneration.

9084 - This classification applies to restaurants that have more than 50% of their revenues coming from the sale of alcoholic beverages such as beer, liquor or wine. It is used for bars, discotheques, lounges, nightclubs and taverns. The payroll should include musicians or entertainers employed by these establishments when these musicians or entertainers are considered employees for workers compensation purposes. Employees of a Code 9084 risk may engage in the preparation and service of alcoholic drinks such as liquor, beer or wine intended for consumption on the premises. These employees may also prepare and serve hors d’oeuvres, light snacks and, in some cases, complete dinners. Patrons of this type of restaurant are generally expected to give wait staff a gratuity based on quality of service rendered. The Florida rate for this classification in 2007 was 4.22 and in 2008 it is now 3.35 dollars for every 100 dollars of remuneration.

9083 - This classification code is applicable to fast food restaurants including, but not limited, to pizza parlors, sandwich shops, concession stands, and hamburger, taco or fried chicken restaurants. For purposes of this classification, fast food restaurants are defined as establishments that prepare and serve food and beverages for consumption on or off premises. Fast food restaurants offer limited menus, which usually include items such as sandwiches, side dishes such as French fries, and soft drinks. The customer will enter the restaurant, proceed to a counter and place an order. The completed order is handed to the customer, who will pay for same. The customer may then leave the restaurant with the order or seek out his/her own table. After completion of the meal, many fast food restaurant customers will clean up their own tables and deposit their litter in designated receptacles. Patrons of this type of restaurant are generally not expected to leave a gratuity. Code 9083 is not applicable to a full service restaurant that employs wait staff. It is recognized that fast food restaurants will, on an occasional or accommodation basis, provide wait service. An occasional or accommodation basis may include the offering of wait service for customers that have limited capacities to obtain their own counter service or offering wait service for groups that request this service for an occasion such as a meeting or birthday party. Caterers contemplated by Code 9083 include caterers that prepare sandwiches for box lunches and other similar services. These foods will be sent to customers or taken to various plants or office buildings for sale to employees of such concerns. The dispensing of food, drinks, candy, etc., at ballparks, race tracks, boxing arenas and theaters by independent concessionaires also is assigned to Code 9083 provided that the requirements regarding wait service are met. The Florida rate for this classification in 2007 was 3.30 and in 2008 it is now 2.81 dollars for every 100 dollars of remuneration.

9082 - This classification code contemplates the “traditional” restaurant that provides wait service. Customers in this type of establishment may either select their own table or be escorted to a table by a restaurant employee. The customer will place an order with a member of the wait staff. This employee in turn places the order with kitchen staff, who will prepare same. The food is delivered to the customer by wait staff, who remain available to assist the customer throughout the course of the meal. Patrons of this type of restaurant are generally expected to give wait staff a gratuity based on quality of service rendered. Code 9082 operations are also designated as “not otherwise classified” (NOC). Restaurant businesses should be placed in Code 9082 only when no other classification more specifically describes the insured’s operations. The Florida rate for this classification in 2007 was 4.25 and in 2008 it is now 3.13 dollars for every 100 dollars of remuneration.

If you would like more information about any of these classifications or information on how your own employees should be classified, please do not hesitate to contact our office or request a workers’ compensation quote online.

Question: What is the ‘great trade-off’ in workers compensation insurance?

In workers’ compensation insurance, the ‘great trade-off’ protects employers because the injured employee agrees to give up his/her right to sue the employer if they receive benefits for the work-related injury. An employer’s ‘exclusive liability’ to an employee who suffers an accidental injury or death arising out of work performed in the course and scope of employment is to secure the payment of WC benefits, as set forth in the law. By purchasing a WC insurance policy or otherwise securing the payment of benefits in a manner permitted by the law, an employer is immune from any other liability to an injured employee or his family. From the employee’s viewpoint, recovery of WC benefits is the ‘exclusive remedy’ for his injuries.

The immunity of employers is specified in 440.11(1) of the Florida Statutes, which states that the liability of an employer to secure the payment of WC “shall be exclusive and in place of all other liability to any third-party tortfeasor and to the employee, the legal representative thereof, husband or wife, parents, dependents, next of kin, or anyone else entitled to recover damages from such employer” due to the injury or death of an employee. Immunity applies even if an employer’s negligence causes an injury.

The Florida Supreme Court interpreted this section in Seaboard Coast Line Railroad Company v. Smith.

“An employer under this Act is not liable in tort to employees by virtue of the express language of the Act. Such immunity is the heart and soul of this legislation which has, over the years been of highly significant social and economic benefit to the working man, the employer and the State. And whether the injury to the employee is caused by ‘gross negligence,’ ‘wanton negligence,’ ’simple negligence’ passive or active, or no negligence at all of the employer is of no consequence. There is no semblance of suggestion in these statutes that the Legislature intended to make any distinction in degrees of negligence so far as the employer’s immunity is concerned and we see no reason or logic in any distinction.”

Note, however, that the ’great trade-off’ does not protect the employer from every situation. In Byerley and Byerley v. Citrus Publishing Co., Inc., the First DCA held that an employer can’t successfully deny WC benefits by saying the injured worker was outside the scope and course of employment and then, when sued in tort for negligence, contend that workers’ compensation is the exclusive remedy. Click here to read more information on workers’ compensation insurance.

Question: Is there a limit to the benefits paid to an injured employee under my workers’ compensation policy?

No, there is no limit to the benefits paid to the injured employee under part one of the workers compensation policy that  provides Workers Compensation Insurance. The policy limits are for part two of the policy. The main difference between the two parts is that Part One applies to the statutory benefits paid by the insured and Part Two applies to common or tort law or other damages for which the insured is liable. Click here for more information about workers’ compensation policy limits.

Question: What is the fee for terrorism on my Florida workers’ compensation policy?

The fee on your policy is approved by the state of Florida. Since the terrorist attacks of September 11, 2001 workers compensation insurers have been taking a closer look at their exposures to catastrophes, both natural and man-made. Workers compensation claims for terrorism could cost an insurer anywhere from $300,000 to $1 million per employee, depending on the state. As a result, firms with a concentration of employees in a single building in major metropolitan areas such as Miami or near a “trophy building” are now considered high risk, a classification that used to apply only to people in dangerous jobs such as roofing. Florida allowed a mandatory fee for terrorism to be added to all workers’ compensation policies. The fee is based on payroll and the rate of 0.03 per $100 units of remuneration is added to the policy premium after the manual premium, experience mod, and safety credits have been applied. Please clich here for more information on computing worker’s compensation premiums in Florida.

Question: Why have the rates for workers’ compensation in Florida gone down so much over the past few years?

In Florida, the workers compensation rates have fallen more than 50 percent since a 2003 reform measure tightened the definition of permanent disability, made it harder to collect benefits for mental impairment and also limited the fees of attorneys who represent injured workers to a maximum of 20 percent of the award they obtain for their client. Since 2007, there was an average rate reduction of 18 percent. Overall, Florida now has one of the lowest rates for workers compensation of any state in the country.

The attorney fee provision that accounted for a large part of the drop in rates is currently being challenged. Prior to 2003 attorneys charged hourly rates, which in some cases far exceeded the amount of money they collected for their client. Trial attorneys are arguing in court that the fee limitation is unconstitutional in that there are no similar restrictions on the fees of defense lawyers who represent the workers compensation insurer and they are asking the Florida Supreme Court to reinstate hourly rates. At the same time, injured workers with small claims complain that they cannot find attorneys to accept their cases. In the case before the court, Murray v. Mariner Health, the claimant’s attorney submitted a bill for 80 hours and asked the court to overrule the fee provision. The claimant received $3,224 in benefits. Oral arguments are scheduled for the fall of 2008. Could this be the end of Florida’s falling workers’ compensation rates?

Question: What class code do I now use for the workers’ compensation insurance on my janitorial business?

There were two classifications used for janitorial businesses in 2007 that are no longer in use:

9000 - This classification is assigned to insureds who contract with others to provide both commercial and/or residential janitorial services excluding washing of windows. This class does not include painting, maintenance, or repair on the customers’ premises. Code 9000 is assigned to cleaning and sanitizing rest rooms and the cleaning of interior walls as well as routine dusting, vacuuming of rugs and emptying ashtrays. It can also be assigned to residential chimney cleaners and residential boiler cleaners. The rate for this classification was 6.29 per $100 of payroll in 2007. Florida no longer uses this classification code.

9001 - This classification is assigned to insureds who contract with others to provide both commercial and/or residential janitorial services including washing of windows. This class does not include painting, maintenance, or repair on the customers’ premises. Code 9001 is assigned to cleaning or sanitizing rest rooms and the cleaning or washing of interior walls as well as routine dusting, vacuuming of rugs, emptying ashtrays and window washing at the same location. The rate for this classification was 9.90 per $100 of payroll in 2007. Florida no longer uses this classification code.

In 2008, all of these businesses are being reclassified to the following class codes:

9014 - This classification code is assigned to businesses primarily engaged in providing janitorial services for others that does not include window cleaning above ground level. Janitorial services are defined as keeping a building clean by routine dusting, mopping, vacuuming, waxing, or polishing of floors, emptying of trash, cleaning or washing of interior walls, and cleaning, sanitizing, and deodorizing of restrooms, and/or keeping a building clean and engaging in various types of maintenance or minor repair work for upkeep of a building. These maintenance or minor repair operations may include, but are not limited to, painting, cleaning windows, changing light bulbs, assisting occupants in the placement of furniture, replacing glass panes, clearing drains, and cleaning carpets. This classification code also includes the drivers of the business. The 2008 rate for the 9014 class code is $5.17 per $100 units of remuneration.

9170 - This classification code is assigned to businesses primarily engaged in providing janitorial services for others including window cleaning above ground level. Janitorial services are defined as keeping a building clean by routine dusting, vacuuming rugs, and emptying ashtrays, and/or keeping a building clean and engaging in various types of maintenance or minor repair work for upkeep of a building. Stated differently, a risk qualifies as a janitorial service if the risk engages exclusively in cleaning a building or performs maintenance or minor repair operations in addition to cleaning a building. This code also includes the drivers in the business. It also includes chimney cleaners and pressure washing businesses that conduct work above ground level. The 2008 rate for the 9170 class code is also $5.17 per $100 units of remuneration.

If you would like more information about either of these classifications or information on how your own employees should be classified, please do not hesitate to contact our office or request a workers’ compensation quote online.

Question: How did I get the premium discount on my workers compensation policy?

The premium discount is a factor allowed by the Florida government to lower the cost of larger workers compensation premiums. The discount was created to reflect the lower expenses incurred by the insurance carrier for handling large insureds. The premium discount factor varies for the size of the account and it is allowed on policies with a premium that exceeds $5,000.

Question: What is the charge for ‘expense constant’ listed on my workers’ compensation policy?

The expense constant is a fee applied to all Florida workers’ compensation policies regardless of premium size and it covers administrative expenses such as policy issuance, auditing, and recording. It is applied at the end of the premium calculations and therefore is not subject to experience modification. Currently, it is 200 dollars in the state Florida.