Nowhere does the maxim “Safety pays” have more meaning than in the insurance premiums computed by the state government agency administering its worker’s compensation insurance program. A poor accident rate by either a subcontractor or a general contractor’s workers will cause worker’s compensation rates to increase where they will remain at a higher level for three years subsequent to the year in which the poor accident record was incurred. After that three-year period, a better safety experience will cause the rates to be reduced.
Worker’s compensation insurance premiums are established by applying the following formula:
A poor accident record resulting in a higher worker’s compensation rate can, in effect, increase the contractor’s or subcontractor’s overhead by a point or two, a key element in remaining competitive in a tight market. And since it will take three years to erase this bad record, a general contractor or subcontractor will be saddled with this penalty for many years.
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