What you need to know about furloughed employees due to COVID-19, Code 0012 and how they effect your workers compensation premium.
Lets start off with some questions and answers about furloughed employees and how they are being treated.
Do I have to pay workers compensation premium on employees I keep on the payroll but have sent home? A key here is that you have employees you have sent home on a temporary layoff. These are furloughed employees. They are employees of your company that you have kept on your payroll but because of COVID you have no work for them to do so you have sent them home for a period of time. Furlough means that you have granted a leave of absence. That they remain your employee but they are no longer in the work environment. Most states have adopted some form of exclusion for payments made to furloughed employees from being included in your workers compensation premium.
If a furloughed employee performs clerical or other work duties while at home can I still exclude their payroll from my workers compensation premium? No. The key here is that a furloughed employee cannot perform any duties for the employer and still be considered a paid furloughed employee. If the employee performs any work duties while away the payroll generated for those duties will be assigned to the classification code that applies to the work they are performing and a premium charge will be made.
What is Classification Code 0012? Workers Compensation Code 0012 is the code designated to be used for paid furloughed employees. Payroll made to furloughed employees during the temporary layoff should be accurately recorded in your payroll records. This payroll will then be reported to your insurance carrier under code 0012. Payroll included under code 0012 will be excluded from your premium calculation.
Do I need to let my insurance company know ahead of time that I will have furloughed employees? Yes. You should communicate with your workers compensation insurance company that you need to add code 0012 onto your policy. They may require you assign some payroll to this code in order to add it to your policy. This should be done as no additional cost as the rate for 0012 will be 0. This may be a requirement in some states in order to have any actual payroll assigned to the 0012 class code.
Will I still have to go through the Workers Compensation Audit? Yes. Premium Audit is the method used to develop the actual premium for your workers compensation policy. It’s the audit process that determines proper class code assignment by the insurance company. As a matter of fact the workers comp audit becomes very important in applying the code 0012 to your policy. Proper payroll record keeping is required if you are going to show furloughed employee compensation. Your payroll records must accurately document and reflect the actual compensation for your furloughed employees. Without proper records the auditor may not allow the use of code 0012 and then assign payroll you were counting on being in 0012 into higher rated codes.
My business is Experience Rated, will payroll made to furloughed workers be included in my experience rating calculations? No. Payments made to furloughed workers will not be included in experience ratings.
Is there an expiration date for using code 0012? Yes and No. For those states who use NCCI, Item Filing B-1441, which established the use of furloughed employees and created code 0012 for reporting payroll had an expiration date of December 31, 2020. As we are all well aware the COVID-19 pandemic continues and no one knows the ending date. Because of this NCCI created a new filing which removed the expiration date. After your individual state has approved the new filing B-1441 will remain in place until some future date to be determined at which time it will expire. So be sure to check with your insurance agent and or your individual state regulators to determine if your state is continuing to provide this valuable premium relief for your furloughed workers.
A few things to keep in mind:
- Code 0012 only applies to furloughed workers who are unable to perform their normal work duties; who are being paid; who are doing NO work while furloughed.
- Contact your workers compensation insurance company and inquire into having Code 0012 added to your policy.
- Ask your insurance agent if your state has adopted the furloughed employee rule.
- Ask your insurance agent or your state workers compensation regulator if your state has extended the use of the furloughed employee rule.
- Do not make assumptions that you furlough or give a paid leave of absence
So be sure you ask your workers compensation agent about how you may be able to use Code 0012 to save your business premium dollars when you have placed your workers on a paid leave of absence or furlough due to Covid-19!
Hope this helps you out!