A construction worker earning $25 per hour works 45 hours in one week. Using Hawaii's workers compensation rate of $12.75 per $100 of payroll for this classification, what is the workers compensation premium for this worker for the week?
Correct Answer
D) $143.44
Weekly pay = $25 × 45 hours = $1,125. Premium = ($1,125 ÷ 100) × $12.75 = 11.25 × $12.75 = $143.44
Why This Is the Correct Answer
Step 1: Calculate weekly gross payroll. Regular 40 hours × $25 = $1,000. Overtime 5 hours × $37.50 (time-and-a-half) = $187.50. However, the question states the worker 'earns $25/hour works 45 hours,' which in workers comp calculations uses the actual gross payroll: $25 × 45 = $1,125 (straight-time basis for WC premium purposes in this problem). Step 2: Apply the premium rate. ($1,125 ÷ 100) × $12.75 = 11.25 × $12.75 = $143.4375, rounded to $143.44. Workers compensation premiums are calculated as a rate per $100 of payroll, making the divisor 100 the critical step.
Why the Other Options Are Wrong
Option A: $156.25
$156.25 results from an incorrect payroll base. A candidate who uses only 40 hours ($25 × 40 = $1,000) and then makes an arithmetic error, or uses a different rate calculation, arrives near this figure. $1,000 ÷ 100 × $12.75 = $127.50, not $156.25, so this answer does not follow from a single consistent error.
Option B: $165.38
$165.38 likely results from applying overtime pay (1.5×) to all 45 hours or to the extra 5 hours and then miscalculating. For example, $25 × 40 + $37.50 × 5 = $1,187.50; $1,187.50 ÷ 100 × $12.75 = $151.41, still not this figure — this is a strong distractor for candidates who over-complicate the payroll calculation.
Option C: $127.50
$127.50 results from using only 40 straight-time hours: $25 × 40 = $1,000; $1,000 ÷ 100 × $12.75 = $127.50. This is a common error — forgetting to include the additional 5 hours of overtime work in the payroll base.
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