Workers’ Compensation Basics for Ecommerce, Retail

Retailers selling at a brick-and-mortar shop or through ecommerce have a duty to provide a secure work environment. Moreover, they could have a statutory requirement to buy workers’ compensation insurance to make certain that workers get the care they need to recuperate and replace salaries when accidents happen, and they’re not able to work.

The U.S. Department of Labor’s Office of Workers’ Compensation Programs “administers four major disability compensation programs which provide wage replacement benefits, medical treatment, vocational rehabilitation, and other benefits to certain workers or their dependents who experience work-related injury or occupational disease.”

The particulars of the compensation programs are state controlled. So the requirements for a specific retail store or online store will be dependent on state law.

Additionally it is important to bear in mind that workers’ compensation benefits can be issued regardless of who’s responsible — be it that the worker, employer, or even a third party.

Injured workers who take workers’ compensation benefits may not sue their employers for the covered injury. So there’s a sense in which workers’ compensation insurance protects companies.

As a company grows and hires workers, it is going to have to acquire workers’ compensation insurance. Picture: Oliver Hale.

Coverage Mandates

If your business has workers (or possibly even contractors), it should ascertain whether state law requires workers’ compensation policy. The previously mentioned Office of Workers’ Compensation Programs maintains a list of each state’s workers’ compensation office. So this should be your starting point.

There may be significant differences among nations. Sometimes, even sole proprietors might need to buy workers’ compensation insurance for family members that help. Or your company may have to cover a builder working at home in a different state. Just be sure to assess what the state needs.

A payroll management agency or, sometimes, even very good payroll software can also help your company determine if workers’ compensation insurance is required. Payroll plays a part in how premiums are calculated, and that’s why a lot of payroll companies handle workers’ compensation also.

Insurance Options

Generally speaking, workers’ compensation insurance is only coverage your company purchases. What government entity or private insurer your company purchases it from depends on your state’s program.

In many nations, a retail company can buy workers’ compensation insurance from a private insurance provider. This might be the exact same company your company uses for general liability or other kinds of insurance.

Your company might use a state-backed insurer or possibly a state-managed fund. In certain states, very large companies may be allowed to fund their own workers’ compensation program.


Just like other kinds of insurance, a merchant will make premium payments for coverage. How much is paid depends upon three variables: what sorts of jobs are being covered, how big the payroll is, and the corporation’s claim history.

A business could pay a good deal if it had many workers doing dangerous warehouse work, as could a company with a history of workers’ compensation claims.

Insurers and state governments use workers’ compensation codes to speed how hazardous a specific job may be. These codes are detailed descriptions of their job activities and possible hazards associated with a given job. Codes differ from state to state, and there are a few hundred codes in use.

Each code is assigned a speed. By way of instance, in Idaho, code 7360000 is a cargo handler. At the time of writing, that code had a rate of $5.09 per $100 of payroll. This rate becomes the primary variable in the premium calculation. In the example below, you would replace RATE with $5.09.


The PAYROLL factor is just how much your company spends on a given job type organized to $100 units for comparison. By way of instance, if your organization pays $300,000 each year in salary for cargo handlers, the calculation would be $300,000 divided by 100.

EXPERIENCE MODIFIER represents your company’s workers’ compensation history. If your business submits more claims than ordinary, it might have a modifier greater than 1.00. If it’s fewer claims than ordinary, it might have a modifier less than 1.00. An ordinary claim history could have a modifier of 1.00.

Let’s assume your organization is a little better than average. It may get an EXPERIENCE MODIFIER of 0.90. Using that modifier and the numbers from above, let’s look at an illustration premium calculation.

$5.09 x ($300,000/100) x 0.90 = $13,743.00

In this instance, the premium will be $13,743.00 annually or about 4.5 percent of their entire deductions for cargo handlers.

Be aware that this is a simple example. Many state programs provide discounts for quarterly or yearly payments. State laws may also modify this simple equation. And other factors might be considered for some countries or businesses. So don’t take care of this case because the gospel truth; it is supposed to describe important aspects that contribute to employees’ compensation premiums.

Reduced Premiums

Picking, packing, and transport orders for an ecommerce store aren’t as hazardous as, say, working with high-voltage power or fighting fires. However there are still risks from slips, falls, cuts, strains, and similar. For the sake of your employees, do whatever you can to make a safety culture to prevent injuries.

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This may include (a) using a third-party audit your facility for possible hazards, (b) offering safety training, (c) holding regular safety meetings, (d) appointing security winners, and (e) ensuring that employees have the appropriate tools. By way of instance, a specialized box knife might be safer than a pocket knife for opening boxes.

Many states and lots of insurers have training programs which will also help your company improve workplace safety.

If you can help your employees stay safe, your organization can finally decrease its experience modifier. A decrease modifier causes a lower premium. Just bear in mind it can take a couple of years to get a modifier to be established.

After improving security and awareness, your business might also have a look at your job codes. Utilizing Idaho as an example, there are two codes for cargo handlers. Code 7360000, used previously, has a rate of $5.09. But code 7350000, that can be a cargo handler, has a rate of $15.60 per $100. Thus making sure that your employees are properly classified may result in cost savings, too.

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