There are a number of reasons a business would calculate the amount of payroll as a basis for workman's comp, or "worker's compensation." This is a premium paid to an insurance company to cover on-the-job injuries. Insurance companies use several factors to calculate the amount any particular company pays, including payroll. A business, however, may wish to calculate just the payroll amount in order to budget for payroll expense, or to accurately estimate expenses in bidding on a project. Also, insurance companies often require an annual payroll audit from a business to adjust the premium amount.
Calculate all gross salaries and wages for the business. Use the company's fiscal year for the date range if this is for company information. If your insurance company is asking for information, they will usually supply a date range based on the premium due date. Calculate pay before taxes or Social Security is withheld, but do not include things like the employer's contribution to retirement or health insurance.
Add in the value of housing or utilities provided for any employee.
Add the value of meals provided to employees.
Add contract labor, if you use independent contractors to do some work for your business. If the contractor can provide a certificate proving their own workers' compensation coverage, you can leave them off. Otherwise, include the amount you pay contractors during the date range.
Add the totals. This is the amount on which your workers' compensation premium is based, although it will vary with other factors the insurance company includes, such as the type of business you own and your safety record. The premium will be a percentage of each $100 of payroll.
- Making a financial plan image by Allen Stoner from Fotolia.com