Amarillo is an inexpensive place to live and operate a business. It's more affordable, in almost every regard, than most U.S. cities, and that has long been the case.
Companies located in Texas have freedom of choice when it comes to workers’ compensation. Texas is one of only three states in the country that does not require workers’ compensation coverage. Employers in Texas can buy workers’ compensation insurance from among 260 private insurers, or from the Texas Workers’ Compensation Insurance Fund (a private fund capitalized by a state bond issue), or an employer can “go bare” and not provide workers’ compensation coverage.
Companies without coverage instead pay for employees’ injuries out of pocket or by purchasing standard health and disability policies, along with an indemnity policy to guard against catastrophic claims. According to a study by Texas A&M University, 44% of businesses in the state don’t provide workers’ compensation insurance. One large Amarillo company (2,000+ employees) stopped subscribing to the state workers’ compensation system and cut its annual cost from $19 million to $1.5 million (a savings of 92%). The company offers higher benefits to injured workers than those provided under the state system and specifies a list of doctors that workers can go to for treatment. A smaller Amarillo company has been a “non-subscriber” for several years. Actual on-the-job injury costs have been 85% to 90% less than their workers’ compensation premiums would have been.
Another option for employers who meet statutory requirements is a state self-insurance program. This program offers all the liability limitations that presently exist for workers’ compensation subscribers while reducing costs.
Texas reformed its Workers’ Compensation Act in 1991. Since then worker-comp premiums paid by businesses have come down by more than half. The average cost of lost-time claims dropped from about $13,000 in 1991 to $4,615 in 1994, and the number of claims paid has been cut almost in half. At the same time, injured workers are being paid faster, benefit levels have increased and reports of workplace injuries have begun to diminish. All of this after the plaintiff lawyers were essentially replaced with an administrative mechanism.
The unemployment insurance tax rate is based on the type of business, Texas' operating history of the business, employee experience record, and the size of payroll. The Texas Workforce Commission administers and collects this tax levied on the first $9,000 in wages for each employee. For new businesses, the initial rate is 2.7%. An adjustment made eighteen months later is based on layoff experience and resulting rates range from 0.35% to 6.35%.