Classification codes are all about details! I recently had a discussion with an employer who sort of understood the code concept but still didn’t grasp the idea that he could not separate his employee payroll by different job classes. Let’s talk about the basic classification, the governing class code and payroll separation.
In simple terms, the basic classification is the single workers compensation code that best describes a business operation and applies to all classes except the standard exception classes. Not individual process within that business, but the overall business operation. For example:
- A business that makes a product may be a carpet manufacturer;
- A retail store may be a clothing store;
- A service business may be an auto repair shop;
This is known as the basic classification. Classifications are really broken out into two types, the basic classification and the standard exceptions. Standard exception codes include clerical, drivers, outside sales and a few others.
The governing classification for a specific location or job is the classification that generates the greatest amount of payroll for the operation, other than the standard exception classes. For example if these codes describe a business with these payrolls:
- Code 8039 – Store: Department – Retail with $400,000 payroll
- Code 8810 – Clerical – with $500,000 payroll
Then the governing classification code will be 8039 in this situation because it has the greatest amount of payroll, other than clerical, which is one of the standard exception classifications.
And now let’s talk about payroll separation. Payroll separation is not allowed for most business operations. Payroll separation is where you can split the payroll of a single employee who performs multiple jobs within the business operation. An exception is made for construction industry operations. Construction operations are, for the most part, allowed to separate payroll. But the rules of proper documentation must be followed! You cannot just guess at the time the employee worked different jobs. The documentation must show actual hours worked by job or process. Of course it’s much more complicated so be sure to consult with your insurance company or work comp premium consultant to make sure your documents will meet the requirements at audit time.
So, remember this, most business operations cannot separate payroll and those who can must follow the proper guides for documentation or separation will not be allowed.
As a final comment, classification codes and properly classifying a business or work process can be complicated. The details only found within each classification code description is the place to start. Many codes, within their descriptions, provide information as to how the code is to be applied and what restrictions may apply to its use.
When it comes to workers compensation codes, it really is about the details!
Hope this helps out! Thanks!