What is the primary basis for determining the premium charged for a standard worker's compensation policy?

The primary basis for determining the premium charged for a standard worker's compensation policy is payroll. This is because workers' compensation premiums are calculated as a function of the total payroll of the employer, reflecting the risk associated with the number of employees and the nature of their work. Higher payroll typically indicates a larger workforce, which can correlate with a greater accumulation of risk for workplace injuries.

Additionally, specific rates are applied depending on the classification of the work being performed, as different industries have varying risks associated with employee injuries. The premium is thus tailored to accurately reflect the financial exposure that the insurance company may face due to potential claims from employees.

Other considerations such as gross sales, federal tax implications, and company assets are not directly related to the way premiums for workers' compensation are structured. Gross sales do not account for the number of employees or their work conditions, while federal taxes and company assets do not inherently reflect the risk profile necessary for accurate premium assessment. Therefore, focusing on payroll provides the most reliable basis for assessing potential liability and ensuring adequate coverage for workplace injuries.