What is the formula for Workers Compensation?

• A. Total annual payroll x rate for workers' comp / 100
• B. Total annual salary x 0.04
• C. Total annual salary x workers' comp bill rate / 100
• D. Sum of salaries times 0.5

Answer: (C)

Workers' compensation costs are based on exposure to payroll, not on salary amount. The way premiums are priced is to take the total annual payroll, multiply it by the rate charged for workers' comp per $100 of payroll, and then divide by 100 to convert that rate into a dollar amount. For example, with a payroll of $1,000,000 and a rate of $3 per $100 of payroll, the premium would be 1,000,000 × 3 ÷ 100 = $30,000. Using salary rather than payroll isn’t how premiums are typically calculated, and a fixed percentage like 4% or a separate “bill rate” applied to salary doesn’t reflect the standard method insurers use, which scales with payroll and risk factors.