When Workers Compensation Payroll Means More Than You Think!

What constitutes workers compensation rating payroll? Is it just the gross pay that you compensate your employees for work they perform? Or can it be something more? When it comes to workers compensation rating payroll you may just be surprised at what’s included! In this post we’ll take a look at some rating payroll details.

We are asked, with some regularity, to consult on audit situations where whats being used as a rating payroll is center stage. Actually it’s not even called payroll but is known as remuneration. Why? Because remuneration is made up of more than what’s commonly known as payroll.

We’ve shown this list before, it’s from NCCI so it applies to those states where NCCI is the advisory organization, but just take a look at what’s included:

  • Wages or Salaries – This includes retroactive wages or salaries.
  • Cash paid to an employee for commissions including draws against commissions.
  • Bonuses including forms of stock bonus plans.
  • Extra pay for overtime subject to rule exceptions.
  • Pay for holidays, vacations, or sick days.
  • Employers payment of amounts that would have been withheld from employees to meet certain statutory obligations for insurance or pension plans such as social security or medicare.
  • Pay to employees on any basis other than time worked including piecework, profit sharing or other incentive plans.
  • Payment or allowances for hand tools including hand held power tools used by employees in their work.
  • Rental value of housing, apartment or dwelling provided to an employee based on comparable accommodations.
  • Value of lodging, other than an apartment or dwelling, received by an employee as part of their pay as shown in the employers records.
  • Value of meals received by employees as part of their pay as shown in the employers records.
  • Value of store certificates, merchandise, credits or any other substitute for money received by employees as part of their pay.
  • Payments for salary reduction, employee savings plans, retirement or cafeteria plans that are made through employee-authorized salary reduction from the employees gross pay.
  • Davis-Bacon wages or wages from a similar prevailing wage law.
  • Annuity plans.
  • Expense reimbursement to employees to the extent that the employers records do not confirm the expense was incurred as a valid business expense, subject to an overnight expense allowance exception.
  • Compensation for filming of commercials excluding subsequent residuals that are earned by the employees.

Now that’s an impressive list! So payroll means money or any substitute, whether that substitute is goods or merchandise or other items of value used in the place of money. A good general rule of thumb is if you give it to your employee as compensation for work they perform then the value is counted as rating remuneration for workers compensation. 

One area that always causes problems is that of Davis-Bacon or other type of prevailing wage law compensation.  The Davis-Bacon Act, a federal law, was passed in 1931 and establishes the requirement for paying prevailing wages on public projects. Construction work on Federal  government contracts over $2,000 in value are required by the act to pay workers no less than local prevailing wages plus benefits. These wages are considered rating remuneration.

Another area that is quite confusing is that of benefit plan contributions. It can boil down to whether the employer pays the benefit direct to the plan or payroll deducts through salary reduction from the employees gross. This is where details really count! And generally when there’s a problem involving benefit or pension contributions the effect on premium is substantial.

So what’s excluded? This list is just as long and just as strange! But here it is:

  • Tips and other gratuities received by employees.
  • Certain payments made by an employer to group insurance or pension plans for employees other than the ones shown above on the included list.
  • Payment by an employer into third party trusts for Davis-Bacon or similar prevailing wage law provided the pension is qualified under Internal Revenue Code 401a and 501a.
  • Value or reward for invention or discovery.
  • Severance payment.
  • Payment for active military duty.
  • Value of employee discounts on items purchased from the employer.
  • Expense reimbursement to employees provided the employers records show it as a valid business extent, subject to verification and guide.
  • Money paid for supper for working late.
  • Uniform allowances for work clothing.
  • Sick pay to an employee from a third party.
  • Certain employer provided perks like: company car; air flight; incentive vacations; certain discounts on services; club membership; tickets to entertainment.
  • Employer contributions or payments into employee benefit plans like: employee saving plans; retirement plans; cafeteria plans.

 A word of caution. Be careful with your interpretation of these items. While they may seem clear, they may not be. If you have any questions about what should or should not be included in your rating payroll consult with your agent or insurance carrier. Find out their take. If you still need help, contact a work comp consultant for help!

Hope this helps you out!