PAYROLL REPORTING INSTRUCTIONS & ANNUAL PREMIUM AUDIT INFORMATION

Transcription

1 PAYROLL REPORTING INSTRUCTIONS & ANNUAL PREMIUM AUDIT INFORMATION 2018

2 TABLE OF CONTENTS A. GENERAL NCCI CLASSIFICATION CODE DEFINITIONS B. PAYROLL REPORTING 1. LIMITS/RULES FOR OFFICERS, OWNERS, PARTNERS AND SOLE PROPRIETORS a. OFFICERS PAYROLL LIMITS b. PARTNERS AND SOLE PROPRIETORS PAYROLL LIMITS 2. OVERTIME a. DEFINITION b. EXCLUSION OF OVERTIME PAYROLL 3. WHAT SHOULD BE REPORTED C. EXPERIENCE MODIFICATION RATING D. SUBCONTRACTORS E. ANNUAL PAYROLL AUDIT 1

3 The purpose of this pamphlet is to provide clarification for payroll reporting and to address questions concerning the annual payroll audit. The National Council on Compensation Insurance (NCCI) is the sole entity that creates the rules and regulations regarding classification and basic auditing procedures. The state insurance regulators require that we strictly adhere to the NCCI guidelines. A. GENERAL NCCI CLASSIFICATION CODE DEFINITIONS Below is information relating to the most widely used classification codes and those codes that consistently raise the most questions. Code Clerical: Available for employees engaged exclusively in bookkeeping, record keeping, correspondence or other office work. Code Salespersons: Employees engaged in sales duties away from the employer s premises. Code Contractors Executive Supervisor*: Applicable only for persons exercising supervisory authority through job superintendents or foremen. This classification does not apply to persons that directly supervise workers or who are working job foremen. This class is generally used for construction company owners and job superintendents who frequently inspect job sites but do not perform any physical labor or work on the jobsite. * Texas Code 8809 Contractors Executive Supervisor. Code Drivers: Available only to those employers with a governing classification or other classification that does not include drivers. The vast majority of construction classifications include drivers and therefore any persons performing driving work should be reported under that classification code and not Assignment of Payroll: The assignment of appropriate classifications will be made based on your operations as verified by the annual payroll audit. When multiple jobs are performed by an employee (except codes 5606, 8742, and 8810 as per rule shown below) separate payroll records must be maintained in order for the use of multiple classifications to be used. Operations in which separate payroll records are not maintained will be assigned back to the highest rated applicable classification per NCCI rules. Special Rule for Codes 5606, 8742, and 8810: Payroll for these classification codes cannot be split. If persons shown under these classifications do other work, all payrolls for the year must then be reported in the highest rated classification. The state of Missouri has an exception to this only applicable to Officers and Owners of the Company. See Section B - Payroll Reporting 2

4 B. PAYROLL REPORTING Each state determines the annual amount of payroll for Officers, Owners, Partners or Sole Proprietors that is to be included for purposes of calculating workers compensation insurance premium. Some states establish minimum/maximum limits while other states establish a flat amount that is to be used. We have included the applicable reference tables for the current policy year. For purposes of defining who is considered an Officer of a company you should only apply the Officer/Owner limits and rules for those individuals holding the position of President, Vice President, Secretary, Treasurer or any other officer title as reflected in the company s charter or bylaws and as evidenced by the Annual Report filed with your state of incorporation. This information will be verified during the annual payroll audit to ensure proper reporting. 1. LIMITS/ RULES FOR OFFICERS, OWNERS, PARTNERS AND SOLE PROPRIETORS Payroll for Officers of a company shall be assigned to the classification code that applies to the work for which they perform. The amount of payroll to be used in determining the workers compensation premium to be paid shall be based on their total payroll subject to the following table: a. OFFICERS PAYROLL LIMITS Annual Maximum Annual Flat Amount Annual Minimum Arizona 223,600 54,600 Arkansas 161,200 41,600 Colorado 54,200 Georgia 208,000 52,000 Illinois 223,600 57,200 Iowa 176,800 23,400 Kansas 176,800 44,200 Kentucky 171,600 44,200 Missouri * 41,100 Nebraska 171,600 41,600 New Mexico 166,400 41,600 Oklahoma 176,800 44,200 South Dakota 156,000 39,000 Tennessee 68,900 23,400 Texas 62,400 7,800 3

5 Payroll for Partners and Sole Proprietors of a company shall be assigned to the classification code that applies to the work for which they perform. The amount of payroll to be used in determining the workers compensation premium to be paid shall be based on their total payroll subject to the following table: b. PARTNERS AND SOLE PROPRIETORS PAYROLL LIMITS Annual Maximum Annual Flat Amount Annual Minimum Arizona 55, ,200 Arkansas 40,500 Colorado 54,200 Georgia 51,400 Illinois 56,200 Iowa 176,800 23,400 Kansas 43,700 Kentucky 43,400 Missouri * 41,100 Nebraska 42,500 New Mexico 41,400 Oklahoma 43,900 South Dakota 39,600 Tennessee 68,900 23,400 Texas 62,400 7,800 * Special Rule for Missouri: The state of Missouri requires that 10% of the Missouri annual payroll for Officers, Owners, Partners or Sole Proprietors must be assigned to Code 8810 Clerical or to Code 8742 Salesperson, unless the payroll is already classified to one of these codes. Example: An Officer/Owner/Partner/Sole Proprietor who has earned $100,000 during the current policy period and does work classified to Code 5606 Contractors Executive Supervisor would be limited to $41,100 in reportable payroll based on the above table for Missouri. This amount would then be allocated, per the Special Rule for Missouri, as $36,990 to Code 5606 (90% x $41,100 limited annual amount) and $4,110 to Code 8810 or 8742 (10% x $41,100 limited annual amount). 4

6 2. OVERTIME a. DEFINITION Those hours worked for which there is an increase in the rate of pay: i. For work in any day or any week in excess of the number of hours normally worked, or ii. For hours worked in excess of eight hours in any day or forty hours in any week, or iii. For work on Saturdays, Sundays or Holidays. b. EXCLUSION OF OVERTIME PAYROLL The extra pay for overtime shall be excluded from the payroll on which premium is computed only if records are separated to show overtime according to employee and summarized by classification. Extra pay is the amount paid over and above the base rate of pay. For example, an employee earning $10.00/hour would be paid $15.00/hour for every hour of overtime. In this example, the $5.00 over and above the base rate of pay would be the amount which could be excluded. If records show the total pay earned for overtime (regular pay plus overtime pay) in one combined amount, 1/3 of this total pay shall be excluded. If double time is paid for overtime and the total pay for such overtime is recorded separately, 1/2 of the total pay for double time shall be excluded. 3. WHAT SHOULD BE REPORTED Premium shall be computed based on the total remuneration paid or payable for services of employees or subcontractors (See Section D, Subcontractors). Remuneration includes the following: Wages, Commissions, Bonuses, Holiday Pay, Vacation Pay, Sick Pay, and the rental value of any apartment or house. Pay for holiday, vacation, sick, overtime and all other forms of payroll that are not directly recorded to a specific classification code must be allocated to the Governing Classification. The Governing Classification is defined as the job class that produces the greatest amount of payroll other than codes 8810, 8742, 5606 and 7380, unless 7380 is the primary business. Special Rule for Kansas Kansas policyholders may exclude holiday pay, vacation pay, and sick pay from their total remuneration amounts only if the company payroll records are maintained providing a summary of each employee by class code. If supporting records are not provided to the auditor, the payroll for holiday pay, vacation pay, and sick pay will be included to determine the audited premium for the policy period. **This rule does not apply to amounts paid to an employee and remitted on behalf of the employee to a union vacation fund as required by a collective bargaining agreement. C. EXPERIENCE MODIFICATION RATING Midwest Builders Casualty will utilize the Experience Modification Factor, as determined by the NCCI, for the applicable policy period. 5

7 D. SUBCONTRACTORS Workers compensation laws require that a contractor is responsible for the payment of benefits to employees of any uninsured subcontractor used by the contractor during the policy period. This statutory responsibility is automatically insured by your workers compensation policy and in turn you are responsible for paying the additional premium as determined based on the NCCI rules. To avoid this liability, you must obtain Certificates of Insurance providing evidence that your subcontractors have workers compensation insurance for the work to be performed. You will be required to provide copies of these Certificates during your annual payroll audit. Also, please remember that the Midwest Builders Casualty Risk Management Guidelines require that all policyholders use only insured subcontractors and that the use of uninsured subcontractors may cause your policy to be non-renewed. Our experience shows that uninsured subcontractors have a high frequency of workers compensation claims. Additionally, we are unable to control uninsured subcontractors from both a safety and loss standpoint. E. ANNUAL PAYROLL AUDIT Our payroll auditors are required by NCCI rules to verify the gross wages reported for workers compensation premium purposes to the wages reported on the Federal Form 941 tax reports filed quarterly. The auditors will request copies of both the Federal Form 941 reports and your quarterly state unemployment reports for the policy period. Please be sure that your reported payrolls balance to these reports after taking into account any excludable items. The following items should be made available to the auditors upon their arrival in order to complete the audit. Proper classification of employees by job description and by state. Overtime schedule by employee, summarized by job classification. List of subcontractors used during the policy period. Copies of Certificates of Insurance for subcontractors used during the policy period. Support for state specific Contractors Premium Adjustment Credit (if applicable). Holiday/Vacation/Sick Pay Schedules that includes employee names, job classifications, dates, and wages. Please note that any expense associated with a re-audit that is scheduled at the policyholder s request, due to either inaccurate or missing information at the time of the original audit, will be billed directly to the policyholder. Therefore, we urge you to have your payroll records in order at the time of the scheduled audit, and encourage you to spend the appropriate amount of time with the auditor to ensure that the audit is completed properly and that you agree with the numbers and job classifications. Re-audit requests will only be considered within the 60-day period following the original final audit billing date. 6