For a workers compensation policy, what is the premium basis?

In a workers' compensation policy, the premium basis is primarily determined by payroll, specifically measured as payroll per $100. This method aligns with the risk associated with the types of jobs employees perform and the total payroll amount for the business. Workers' compensation insurance premiums are typically calculated based on the estimated annual payroll for employees, and this figure is crucial because it reflects the potential exposure to claims.

The reason payroll is chosen as a basis relates to the fact that it provides a direct correlation to the amount of risk involved; higher payroll usually indicates a larger workforce, which can lead to more claims, thus requiring a higher premium to cover potential liabilities.

Other options like sales revenue, employee count, or net income do not effectively reflect the risk associated with workers’ compensation. Sales revenue may not correlate with the actual number of employee injuries, employee count doesn't account for the varying wages among different jobs, and net income is not a direct indicator of the workforce's exposure to workplace accidents. Therefore, payroll per $100 remains the most accurate and relevant measure for determining the premium for workers' compensation policies.