Average workers’ compensation rates to increase 3.1% in 2022, one of several payroll taxes scheduled to take effect.

As expected, the state Department of Labor and Industries has approved an average worker’s compensation premium increase of 3.1% for 2022. (Rate tables here.) While the department points out it’s the first increase in half a decade, the timing for employers is not good. L&I writes,

he Department of Labor & Industries (L&I) has approved a small increase in the average price employers and workers pay for workers’ compensation insurance next year. It’s the first time in 5 years that workers’ compensation rates have gone up, but on average, premiums in 2022 would still be less than in 2017.

The 3.1% overall average rate increase is driven by cost-of-living adjustments for pensions, which were triggered by an increase in the state’s average wage. This is an average, meaning some employers will see their rates go down while others will see larger increases.

That average wage math is straightforward and somewhat misleading. The labor force mix in Washington changed substantially in the pandemic, with a much larger share of low-wage workers losing their jobs than higher-wage employees, who could more easily transition to working from home. That meant the average was based on a workforce skewed more heavily to higher earners than in prior years. As pointed out at the link, the higher wage also led to hikes in the average unemployment insurance rates.

While no timing is auspicious for increases in employer costs, this increase comes as employers face higher inflation, which is now expected to last well into 2022. Moreover, as the Washington Research Council reports, it’s only one of several payroll tax increases that will go into effect next year.