13
Fall 2014 Issue
Safety & Workers’ Compensation
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The rate an employer pays to insure an employee in case
of a work-related injury is based on the industry pursuit of
the employer. The Ohio Bureau of Workers’ Compensation
(BWC) reviews the information on the coverage application
and assigns manual classifications to the employer that
correspond with the work being done and the risk of injury
due to hazards associated to that work.
For example, the manual classification for an office worker carries
a lower rate than the manual classification for a construction
worker. This is because there is less hazard and risk of injury for
the office worker and claims costs for office workers are typically
lower than claims costs for construction workers.
Over a four-year period beginning in 1996, the BWC converted
its manual classifications to those established by the National
Council on Compensation Insurance (NCCI). The change,
mandated by law, allowed the BWC to convert to the NCCI
classification system as it represents a more equitable
premium rate structure than the previous system. It also is
a more accurate and understandable system, which better
classifies employers by their predominant business. This
system continues today to provide a consistent rating process.
How will I calculate my payment?
Private employers are required to pay workers’ compensation
premiums into the State Insurance Fund. Employers calculate
their own premium on a payroll report, which the BWC
distributes twice yearly.
The employer is instructed to report the payroll for the previous
six-month period separating the payroll according to the
different manual classifications. (Manual classifications are
assigned to each employer based on the job duties reported
on the initial coverage application.) The payroll report comes
to the employer with the manual classifications and the rates
already entered. The employer enters the actual payroll for
each manual classification, multiplies by the rate assigned to
that manual classification, then adds the totals for each and
this figure is the premium amount due to the BWC.
Do you want to learn more about premium rates?
The Ohio Constitution requires the BWC to classify industries
according to the degree of hazard in the business. This is
accomplished when the BWC assigns manual classifications to
the employer based on the description of work being performed
(this information is taken from the coverage application). Each
manual classification has its own base premium rate.
How are base premium rates determined?
• Base rates are determined by claims costs for a particular
classification industry-wide and not just from one
employer’s experience.
• The BWC’s actuarial department analyzes the costs of all
claims in each manual classification during the oldest
four of the most recent five years.
• This information is used to project the cost of claims that
will occur the next year for each manual classification.
• The BWC’s administrator uses this actuarial data to make
recommendations for premium rates and assessments.
• Final approval of premium rates comes from the BWC
Oversight Commission.
• New rates for private, state-fund employers are effective
each Jul. 1 and new rates for public, state-fund
employers are effective each Jan. 1.
What is reportable payroll?
To maintain workers’ compensation coverage, state-fund
employers are required to submit a payroll report along with
their premium payment to the BWC twice yearly. In defining
payroll, the BWC generally follows the guidelines of the Ohio
Bureau of Employment Services and Federal Unemployment
Tax Authority (FUTA).
The following items are considered payroll
and should be included on the payroll report:
• Gross hourly wages and gross salaries
• Sick pay (including third party, excluding workers’
compensation)
• Bonus payments including stock given as a bonus
• All sales commissions
• All tips
• Severance pay
• Overtime pay
• All stock gifts
• Profit sharing going directly to employees as payroll
• Any voluntary employee contributions to retirement plans,
including 401(K)
• Any portion of cafeteria plans as reportable to FUTA, such
as cash options and unqualified benefits
• Reasonable value of board, lodging, house or room rent
unless provided for the convenience of the employer
• Per diem and travel allowance
(if not paid as reimbursement expense)
• Contributions to deferred compensation by employees,
except for government employees
• Expenses exceeding one-third of an employee’s normal pay
• Personal use of a company car
Decoding the Ohio BWC’s Rating System
A series of factors determine the rates employers pay
