Contractors: Can you save money on Work Comp Insurance?
If you are a general or specialty contractor, you may be able to save money on your Worker’s Compensation insurance just by making sure you are reporting your employee’s wages under the appropriate classification.
Some examples are:
If you are a General Contractor whose employees perform a wide variety of work, you can break down their gross wages and report them by different classifications. Carpentry and roofing work premiums are much higher than painting and concrete work. If your employees break down the time spent on different classified tasks on their time cards, you may report their wages under a variety of classifications. There is a catch ‐ it is now REQUIRED when reporting this way that you have time cards with a time in and a time out for each type of work performed. If you do not have this documentation, in an audit you will be assessed at the highest rated classification and billed for the difference.
If you are a Specialty Contractor – be sure you are reporting your wages in the appropriate classification. One of our clients is a Solar Power contractor who saved significant premiums by investigating what classifications were appropriate for his type of work and changing his reporting classifications.
If you are a Corporation, you may exclude the payroll of Corporate Officer’s from your premiums. For all types of Contractors ‐ Evaluate the true cost of your labor source. Worker’s Compensation premiums are based upon the hourly rates paid to your employees and very by classification. If you are hiring lower‐skilled and lower‐paid employees to save money, you may end up paying them as much ormore as more experienced employees due to the difference in your Worker’s Comp premiums. It is a good exercise to review the cost of all of your employee’s base wages plus the premium. Many contractors actually pay their employees a little more in order to surpass this threshold. If this is thecase – be careful to review the hourly rate cut off when your policy renews. Often, the WCIRB (Worker’s Compensation Insurance Rating Bureau) will raise the hourly rate for the lower premium. You could end up with a large audit premium if you do not give your employees a raise or report their wages under the right class code. There have been many cases where the hourly rate threshold changed and went unnoticed. Check your thresholds on your policy renewal statement every year!
Many people think that State Fund is the bad guy in making determinations regarding class codes, but they are actually following the rules of the Worker’s Compensation Insurance Rating Bureau. The WCIRB is not a government entity. It is a private, nonprofit association, and no state money is used to fund its operations. To learn more about the WCIRB as well as how and why Worker’s Compensation rates are determined visit: https://wcirbonline.org/wcirb/Employer_guide/index.html
To view a detailed listing and description of all classifications visit:
https://wcirbonline.org/wcirb/root/pdf/usrp_ic_regs_only.pdf
In any case, it is important to keep accurate, auditable, records of your payroll in order to ensure you are not over‐paying for worker’s compensation insurance. QuickBooks does a great job tracking your liability and report your wages efficiently and accurately. Any recent version includes a complete Worker’s Compensation module that has streamlined the process completely. ( you must have the Enhanced Payroll Subscription to access this module).
In my QuickBooks for Contractors Job Costing Intensive Program, you can learn how to set up your payroll system in QuickBooks to accurately track and report your Worker’s Compensation and include the cost in your job cost reports. Learn more at : www.jobcosting.com/quickbooks-training
