Payroll Separation Can Lead to Lower Insurance Costs
Payroll separation can be a valuable tool for controlling workers’ compensation costs and lowering premiums. When considering payroll separation, consider the following to maximize your benefits.
Overtime Payments
The extra portion of overtime pay is excluded from workers’ compensation premium charges. To receive credit, separate overtime properly for each worker, and show the total for each classification.
| Example: If a worker earns $10 per hour during regular hours and earns $15 (time and a-half) during overtime hours, the extra $5 overtime pay is not included in the total pay when determining premium. If the overtime rate is double time, half of the payment is excluded and the other half is included. In that case, if the hourly rate is $10 and the overtime pay is $20, $10 will be excluded, and $10 included. |
Multiple Classification Codes Based on Operations
Your operations may involve multiple job functions, some unique enough to merit payrolls being separated by applicable classification codes. Some of those job functions may have lower rated classifications. If you separate your payrolls accordingly, you can take advantage of those lower codes. In the absence of a separation, all your payrolls may be assigned to the highest rated classification.
Construction Industry
In the construction industry, apart from the possibility of more than one classification code being applied to your business, the payroll for individual workers can also be separated among different classifications. This can be done provided the work being separated is not incidental to the primary work being performed.
| Good record keeping is important in this regard, including contracts, invoices, and payroll separation based on actual time worked in each code – not by percentages – as well as any other records relevant for your auditor to verify the separations. See Construction Policyholders Special Circumstances. |
Wrap-Up Jobs – Avoid Needless Charges
When you are contracted to perform a wrap-up job, it is important to forward a copy of the wrap-up insurance coverage certificate to your NYSIF underwriter as soon as possible. This enables us to endorse your policy timely and exclude the job from coverage and premium charges.
During your audit, also known as payroll verification, your NYSIF auditor will separate payrolls for wrap-up jobs. If there is no endorsement however, the separated payrolls will be included in premium charges pending the receipt of certificates and verification of coverage. Once we receive the certificates and verify coverage, we will exclude the jobs from premium charges.
Independent Contractors
The Construction Industry Fair Play Act and the Commercial Goods Transportation Industry Fair Play Act set legal guidelines that determine whether individuals who perform work for you can be considered independent contractors or your actual employees.
Proof of Coverage
To avoid premium charges for any hired contractors, it is important to obtain workers’ compensation certificates of insurance to show proof of coverage and avoid premium charges for them. During the audit process, you should present these certificates of insurance to your NYSIF auditor.