Your Guide to Workers' Compensation in Washington State 2023
Death, taxes, and workers’ compensation premiums.
Ok, Benjamin Franklin didn’t say that. But we are.
If you own a business in the construction industry in Washington state, you are obligated to pay workers’ compensation for your employees - there’s no getting around it.
And you shouldn’t want to.
Workers’ compensation protects you and your business from lawsuits and high pay-outs in the case of injury or illness to your workers.
In this guide, we’re going to walk through everything you need to know about workers’ compensation in Washington state - what it is, when to get it, how to pay it, and more.
Let’s dive in!
Psst.. Want us to take payroll of our hands completely? You can book a complimentary 45-minute call with one of our accountants anytime.
What is Workers’ Compensation?
Workers’ compensation is essentially insurance that protects you, as an employer, from having to pay large sums to your employees who become injured or sick as a result of their job.
It covers both medical costs and lost wages for work-related injuries and illnesses.
For instance, if one of your employees breaks his toe on the job, workers’ compensation will pay for his/her medical bills. Not you, personally.
By accepting workers’ compensation benefits, your employees waive the right to sue you for damages.
Is Workers’ Compensation in Washington State Required?
Yes, workers’ compensation is required in Washington state. In fact, it’s required in almost every state for businesses that have employees.
How Do You Pay Workers’ Compensation in Washington State?
In Washington State, workers’ compensation is state-run, and employers purchase workers’ comp coverage through the Department of Labor & Industries (L&I).
L&I manages all claims and pays benefits out of an insurance pool called the Washington State Fund.
The fund is financed by premiums paid by employers and employees, not by general revenue taxes.
As an employer, you have a few options when it comes to paying for workers' comp insurance.
Some payroll providers offer a pay-as-you-go option, where employers pay based on their actual payroll each pay period.
This can be helpful for managing cash flow and avoiding large lump-sum payments.
Pssst… Our favorite payroll software, Gusto, does it this way for you! We’ll get more into those details down below.
Alternatively, you will remit your workers' compensation liability payment on a quarterly basis.
While holding onto cash for longer may sound appealing in the moment, delaying the inevitable can really put a dent in future cash reserves.
How Much Can You Expect to Pay For Workers’ Compensation in Washington State in 2023?
In 2023, The Department of Labor & Industries (L&I) has announced a 4.8% increase in the average price employers and workers pay for workers' compensation insurance.
The increase means employers and workers will pay an additional $61 a year, on average, for each full-time employee.
Calculating Workers’ Compensation
In Washington, the amount of workers’ compensation you are required to pay as an employer is based on hours worked per employee.
Additionally, it’s configured on a few factors:
Risk classifications assigned to the business: L&I classifies job types according to their levels of hazard or risk. The system has over 300 classifications. Your business may be assigned multiple risk classifications, depending on the type of work your employees will be performing.
Base rates for each risk classification: These are rates set by L&I based on the level of risk associated with each classification.
Your business's experience factor: This takes into account your business's claims history and other factors.
To calculate the premium rate for a specific business and risk classification, L&I multiplies the business's experience factor by the sum of the Accident Fund, Medical Aid Fund, and Stay at Work base rates, and then adds the base rate for the Supplemental Pension Fund.
Here’s an example from the Department of Labor & Industries website:
“If a business has an experience factor of 0.9789 and the base rates for the Accident Fund, Medical Aid Fund, and Stay at Work are $0.0221, $0.0160, and $0.0003 per hour worked, respectively, and the base rate for the Supplemental Pension Fund is $0.1120 per hour worked, the premium rate would be $0.1496 per hour worked.”
Still confused?
Don’t worry!
Here is a handy chart to help you calculate the rate for your business, per hour worked.
Discounts for Workers’ Compensation
In terms of receiving a discount on workers’ comp premiums, the main thing you can do is stay claim-free.
The Department of Labor & Industries (L&I) offer what’s called the Claim-Free Discount, where you can receive a 10-40% discount off your premiums for staying claim-free.
Businesses can qualify for a Claim-Free Discount two ways:
- If your business has no claims, or claims where only medical expenses are paid in the 3-year experience period
- In some cases, by purchasing an existing business that already has a Claim-Free Discount
You can learn more about workers’ compensation over on the website here.
Additionally, you may be eligible for a refund on a portion of your compensation premiums through what’s known as The Retrospective Rating Program.
The Retrospective Rating program is an optional program that allows qualified employers and associations to earn refunds for reducing workplace injuries and lowering associated claim losses.
You can participate in retrospective rating on your own or through group plans sponsored by professional organizations or trade associations, such as BIAW:ROII.
There are four opportunities to enroll in the program each year. Depending on their performance, you could see refunds as early as 10 months after an enrollment period.
Where Can You Get Help With Your Workers’ Compensation?
The best place to get help with workers’ compensation in Washington state is with your dedicated construction accountant or payroll provider.
Here at Atlas Accounting Group, we use Gusto, which is a really helpful payroll software that can take a lot of hassle out of manager workers’ compensation for construction companies.
Here are some of the ways it can make your life easier:
No more manual calculations: Instead of manually calculating your workers' compensation premiums based on your payroll and work risks, we’ll do it for you automatically. That way, you can be confident you're paying the right amount, and save yourself time and effort.
Pay-as-you-go convenience: Gusto has a pay-as-you-go option for workers' comp insurance which means you can pay your premiums each pay period based on your actual payroll. That way, you can avoid any unpleasant surprises, and manage your cash flow more effectively.
Reports at your fingertips: Gusto can also generate reports related to your workers' compensation insurance, like payroll reports, claims reports, and premium audit reports. This can help you keep tabs on your insurance costs and make sure you're meeting state reporting requirements.
Overall, Gusto makes managing your workers’ compensation a whole lot easier.
And we’re big Gusto fans here at Atlas Accounting Group. Even if you don’t work with us directly, we highly recommend checking it out.
You can get your own Gusto license and do-it-yourself here.
Do you want more personalized help with your workers’ compensation or payroll needs?
We offer a complimentary 45-minute call for every construction company to chat about your accounting & finance needs.
Simply use our easy form to get started.
Until next time!
