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Insurance & Bondingaka: workers' compaka: WCaka: employer's liability

Workers' Compensation

In Plain English

Insurance that pays medical bills and lost wages for workers hurt on the job.

Definition

Workers' compensation insurance provides medical and wage replacement benefits to employees who suffer work-related injuries or illnesses, regardless of fault. In exchange, employees generally waive the right to sue the employer for negligence. Most states require employers to carry workers' compensation coverage, and construction contracts routinely require subcontractors to maintain it before beginning work on the jobsite.

Why It Matters in Bidding

Workers' comp premiums are a real line item in labor pricing, calculated as a rate per $100 of payroll that varies by trade classification and by the contractor's experience modification factor. Because the EMR directly multiplies premium cost, a strong safety record lowers labor burden and lets an estimator bid more competitively while still covering risk.

Example

An estimator building labor burden applies the firm's workers' comp rate for the carpentry class code, adjusted by its experience modification factor, on top of base wages when pricing self-performed framing.

Related Terms

Commercial General Liability (CGL)Liability InsuranceIndemnity

Frequently Asked Questions

It is part of labor burden, expressed as a rate per $100 of payroll multiplied by the contractor's experience modification factor. Each trade has its own class-code rate. Estimators apply the appropriate rate to self-performed labor and confirm subs carry their own coverage, since the GC's policy should not absorb uninsured sub payroll.
The EMR compares a contractor's claims history to industry averages, with 1.0 as the baseline. A rate below 1.0 lowers premiums; above 1.0 raises them. Many owners also set a maximum EMR for bid eligibility, so a poor safety record can both increase labor cost and disqualify a contractor outright.
Requiring subs to carry their own coverage shifts injury liability to the responsible employer and prevents the GC's policy from being charged for uninsured sub payroll during audit. GCs collect certificates of insurance before work begins; a sub without valid coverage can stall mobilization and expose the GC to back-charged premiums.

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