Mistakes With Workers Compensation Payroll And How They Can Cost The Employer Dearly

A Los Angeles Workers compensation lawyer explains that in the state of California, workers comp is compulsory for any employer who employs more than one or more people. It is fair to say that most employers look on it as a 'necessary evil' as although it can protect those employees and employers who are covered, it is also a substantial business expense. If it not regulated correctly it could end up costing a company lots of money. One way that workers compensation costs can spiral is in the department of payroll.

In essence there are two main payroll anomalies that employers commonly make. Both of these can end up affecting the employer in different ways and both have cost implications associated with them.

Underestimation of annual payroll projections...A team of LA workers compensation attorneys explain...

An employer's workers compensation premium is directly linked to the company estimated annual payroll. If this payroll is for any reason underestimated at the beginning of a policy period then this can and will result in extra premiums that are due in and around the time of audit. This can in many instances be quite a substantial amount and in some extreme cases can take businesses to the edge of bankruptcy. Clearly unscrupulous employers might think about deliberately underestimating their payroll, simply because they believe that they will pay a lower premium. Whilst this is true in the short term, a look at the bigger picture will tell them that the annual audit will reveal the true payroll figures and this means that businesses who underestimate (albeit intentionally or unintentionally) will indeed be hit with substantial back pay. If you have reason to believe that your employer is committing workers comp fraud, then you should speak to a skilled team of LA workers compensation attorneys who can explain your rights from a legal standpoint.

Overestimation of payroll

In the same way that underestimation of payroll is severely detrimental to businesses, an overestimation can have the same effect, but in a slightly different way. When a payroll is overestimated it means that the employer is overpaying for his workers compensation premiums. Even though the employer may recoup the balance of the overpayment after the annual audit, they are in effect allowing the insurance carrier to hold overpaid premium funds and that money could be put to better use by investing it back into the business. With an overestimated payroll an employer may severely struggle to meet premium workers compensation payments when they don't have to and the way the economy is at the moment it could make a difference between failure and success.

So why would employers overestimate payroll?

It could be that employers are not exactly sure of their annual payroll projections and have overestimated to make sure that they are covered. It could also be that they have taken the figures from last year, even though they have fewer employees on the books. Whatever the reason, it can prove detrimental to the business and not a good use of company funds.

Setting sound payroll projections

A Los Angeles workers compensation attorney explains that setting payroll projections that give a true reflection of where a business is at is incredibly important. It may seem difficult to accurately project what a business's annual payroll is going to be, but if the process is carried out correctly and accurately then the employer will be rewarded. It is also good practice to set periodic monitoring of payroll. By doing this you can ascertain whether you are on track for the rest of the year and as a result can increase or decrease premium payments accordingly.

However difficult the task of payroll projection is, from an employee's point of view it is comforting to know that should an accident occur, then they will be covered. For whatever reason, some legitimate payroll claims still get denied, or underpaid and when this happens to an employee then it is always best to speak to an experienced team of workers compensation lawyers Los Angeles who can step in to make sure that they get the full and fair compensation that they deserve.