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The law requires Washington employers, with few exceptions, to supply Workers’ Compensation Insurance coverage for their employees. This coverage provides protection for work-related injuries and occupational illnesses. Employees, if injured on the job, are covered for all approved medical, hospital, and related services essential to their treatment and recovery. They also receive wage replacement payments if they are temporarily unable to work as a result of an industrial injury or occupational illness.
Workers’ Compensation Insurance is not supported by general revenue taxes. It is financed by premiums paid by employers and employees. Most employers purchase coverage through the Washington Department of Labor and Industries. The department manages all claims and pays benefits out of an insurance pool called the Washington State Fund. Employers may qualify for self-insurance if they have the financial resources to pay all insurance costs and have effective accident-prevention programs.
Employer classifications
The basic premium for Workers’ Compensation Insurance coverage depends on the risk classifications assigned to a business. There are approximately 300 classifications. Each refers to a type, or several types, of business activity and has its own basic insurance rate. This rate reflects the risk of workplace injury or disease in the industry as a whole.
Premium rates
Premium rates are specified per worker hour for each risk classification assigned to a business. The rates consist of three separate components: (1) the Accident Fund premium, (2) the Medical Aid premium, and (3) the Supplemental Pension Assessment. They work like this:
Accident Fund premium: This is paid by the employer only. It provides money to pay non-medical claim costs such as wage-replacement benefits.
Medical Aid premium: This is paid for by both employer and employee contributions. It pays for medical care and related services essential to an injured worker's recovery, including some vocational rehabilitation.
Supplemental Pension Assessment: This is paid for by both employer and employee contributions. This provides cost-of-living increases to injured workers with extended disabilities. The rate is the same for all risk classifications.
Employee contributions
State law provides that the employee share one-half of the total of both the Medical Aid premium and Supplemental Pension Assessment, which may be paid by employee deductions. The employer may deduct all or any portion of the employee rate, but it is illegal to withhold more. Some businesses choose not to make employee payroll deductions at all and instead pay the entire premium themselves.
Determining reportable worker hours
Time off, such as sick-leave hours, vacations, and holidays, is not included in the calculation of Workers’ Compensation premiums &endash; even if it is paid leave. Overtime work is included on a one-to-one basis; that is, each hour of overtime work is taxed as one hour, even though time-and-a-half wages may have been paid.
Salaried personnel
If workers are paid on a fixed salary, regardless of the number of hours they work, they are salaried workers. Salaried workers may be reported using either an average of hours worked or the actual hours worked. All salaried workers must be reported using the same method of either average or actual hours. No reduction to reportable hours can be made for vacation, holiday, or sick leave when using average hours.
Splitting worker hours
The worker hours of any one employee may be divided for reporting purposes between two or more assigned basic risk classifications. This may be done only when accurate records of actual hours worked are kept, supported by original timecard or time-book entries, and documenting the division of duties.
Page Updated 9/03