It’s tempting, as a business owner, to think that you should only report wages and exclude tips from your calculations for Work Comp. However, this may not always be the best strategy. While it seems like an uncertain parameter to include, it’s crucial to remember that tips are an integral part of many employees’ total income, particularly in service industries.
Accurately reporting all employee earnings, including tips, can provide a more comprehensive picture of what your business’s labor costs truly are. This can help you forecast more accurately and provide a more detailed record should you face a workers’ compensation claim.
You might only start out with just a handful of employees, but over time, this number could potentially grow to double digits. As the number of employees increases, so does your responsibility to provide them with a safe working environment and adequate protection in case of a workplace injury.
While the number of employees you have directly impacts the cost of your workers’ comp insurance, it’s crucial to remember that these estimates are not set in stone and can be adjusted as your business evolves. If your workforce grows or contracts significantly throughout the year, your premium may need to be adjusted accordingly.
It might seem convenient to have your insurance premium calculated at the end of the year, as this can initially appear more budget-friendly. However, a sizable premium due at the end of the year, resulting from your audit, can be a substantial financial burden. This is especially true if your business has grown significantly, and you’ve underestimated the number of employees or their total wages.
To avoid this, you might prefer to pay the same amount month-to-month and not face a large ‘audit premium’ due at the end of the year. Planning and constant communication with your insurance provider are crucial. Discuss your growth forecasts and potential payroll increases with them so they can adjust your premiums accordingly and prevent any surprise bills.
It’s about making this vital business component work the way you want, ensuring your business’s financial health, and most importantly, securing the wellbeing of your workforce. If you have questions about your payroll reporting, contact us today!
