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How is Workers Compensation rated and what should I include in the payroll reports?
Your Worker's Compensation premium is determined by multiplying your company payroll times a specific rate charged by the insurance carrier. More specifically, the California Worker's Compensation Insurance Rating Bureau has assigned job classifications to various job descriptions. Each classification has its own rate. When you break down your payroll by job classification and multiply it by the class rate, you determine your manual premium. Applied to the manual premium is your experience modification, if you qualify, plus any additional insurance company modification factors. The result is the modified or actual premium. At the end of the policy term, or perhaps on a quarterly basis, you will need to report your actual payrolls to the insurance carrier. The carrier will then adjust the projected premium, based upon your projected payroll estimates, into actual premium based upon your true payroll exposure. The following should help you to understand the reporting requirements.
What should be included as payroll?
Payroll includes: Gross wages; salaries; commissions; bonuses; vacation; holiday and sick pay; overtime payments; the market value of gifts; and all substitutes for money earned during the policy period by employees and officers of the insured and any other persons for whom voluntary coverage is provided under the policy.
Payroll does not include: Individual special invention or discovery awards, employer contributions to group insurance or pension plans, or tips.
Are Executive Officers included at full salary?
In a word...no. For the 2006 year, the minimum is $32,000 and the maximum is $87,100. For the 2007 year, the minimum is $33,800 and the maximum is $89,700.
How are Clerical and Salesperson Classifications determined?
Clerical-A clerical person is defined as one that is separated from all other work places by buildings, floors, partitions, railings or counters and within which no other work is performed other than clerical office or drafting duties. Clerical office work is defined as keeping the books, records or cash of the employer, or conducting correspondence or general office duties or drafting duties. They shall have no other regular duties in their employment.
Salesperson-A salesperson is defined as one who is engaged exclusively in sales or collection work away from the premises of the employer, OR one who is engaged in such work for ANY portion of their time devoting the balance of their time to clerical office duties.
Can Executive Officers be excluded from coverage?
Employed Officers & Directors cannot be excluded unless they are covered by another worker's compensation policy, are under an authorized self-insured program, or are the only shareholders of the corporation and the officer or director to be excluded is a shareholder .
Can Partners or Sole Owners be covered under Worker's Compensation?
A partner working for a partnership must be covered for worker's compensation benefits, unless he or she is a general partner not electing to come under the Act, or wages are based solely on the profits of the partnership. Working partners are automatically included for coverage, but may be excluded by endorsement.
Sole Proprietors are not automatically covered - they must be specifically approved and endorsed by the insurance company.
Relatives (Applicable only to policies in which an individual is the named employer)
All relatives who are employees must be covered by W.C. benefits. Employed relatives over 12 years of age who reside away from the insured's household are automatically covered. Resident relatives and those under 12 years of age are excluded by most W.C. policy forms and must be specifically named by endorsement to be covered.
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