Many states and municipalities have implemented minimum wage increases, and the federal government may raise the minimum wage nationwide. If you’re a small business owner, you’re likely wondering what these proposed changes could mean for you.
What is the potential impact of higher minimum wage on small business workers’ comp rates?
A higher minimum wage could translate into a larger payroll, ultimately leading to increased workers’ compensation costs. Why? Your payroll is included in the calculation of your workers’ comp premium. Therefore, if you own a business that employs minimum wage workers whose wages increase, your newly increased payroll may change your workers’ compensation costs. For instance, some industries, like leisure and hospitality, tend to employ a greater number of minimum wage workers. Learn more about how your workers’ comp premium is calculated.
How can small businesses save on workers’ compensation costs?
Adjust your small business operations. To reduce workers’ comp costs in the face of minimum wage increases, according to the National Council on Compensation Insurance, businesses could make adjustments to their:
- Hours worked
- Prices for goods and services
- Other aspects of business
Get a current workers’ compensation insurance quote tailored to your small business. Approximately 80 percent of small businesses are overpaying for workers’ compensation insurance by up to 30 percent. Also, workers’ comp rates change from time to time, so be sure to check your current rate regularly to make sure you have the lowest possible premium.
Check the laws in your state. Remember to research the laws in your city and state. In some locations, there are exceptions to minimum wage requirements for small businesses, specifically those with fewer than 25 employees.
Thanks for reading our educational resource on workers’ comp. If you’re a small business owner, learn more about workers’ compensation insurance or check your current rate in as little as two minutes.