It is the number that indicates how your company's claims experience (how many accidents you have and how much they cost) compares to others in your industry. It is used to modify the premium rate you pay into the State Fund to cover workers' compensation claims costs.
Premiums are determined by your Experience Factor (EF)
New businesses normally pay the "base" premium rate, which is set at 1.0. The base rate reflects the risk workplace injury or disease in specific industries as a whole, for each risk classification. After a business established it's own accident experience record, the premium will be "experience-rated." This that your premium may be increased or decreased from the current base rate based on your actual accident history. The higher your claims costs, the higher your experience factor will, and the more money you will pay in industrial insurance premiums You can manage your experience rating by having a good accident history through an effective accident prevention program.
Each year you receive a rate notice that includes the experience factor rating for your business and how much you'll pay for your business ("Your Rate). Your premium rate (per hour), or "composite rate," is determined by multiplying your experience factor (EF) by the sum of the accident fund and medical aid base rates, then adding in the supplemental pension assessment:
Remember from the previous section that share in part of the premium costs, usually deducted by the employer from their paychecks. The employees' contribution to the premium costs is calculated as follows:
The Bottom Line is this: Employers with claims costs lower than expected, have premium rates reduced from base rates. The lower the experience factor, the more you save.
The following example shows how three different companies in the same business can have significantly different premiums, based on their experience factors:
Your company's current experience factor is calculated at the beginning of each year on the basis of your claims track record during a rolling three-year window. For example:
Claims with a date-of-injury between 7/1/98 - 6/30/99 impacts an employer's rates for the calendar years of 2001, 2001, and 2003.
Because your industrial insurance premiums are based on your accident history, you can work to control them. It makes the most sense to focus your efforts on preventing future injuries and industrial insurance claims.
What you do or don't do about injury prevention will affect your company's premiums and profits years to come.Be more competitive when bidding for projects by lowering your Experience Factor
When it comes time to select from among a pool of bidders for a major project, the business with the lowest experience factor has an edge in winning the contract. Why? It presents the lowest risk.
Source: Washington State Department of Labor and Industries
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