Dividing Payroll Between Classifications
Dividing Payroll Between Classifications
December 29, 2023
In this edition: USRP requirements when allocating an employee’s payroll into multiple classifications.
In cases where an employers’ operations have been assigned to more than one classification, it may be permissible to divide a single employee’s payroll between classifications, provided the employee’s working time in each operation has been recorded. The basic requirements for dividing an employer’s payroll between classifications are contained in the California Workers' Compensation Uniform Statistical Reporting Plan—1995 at Part 3, Standard Classification System, Section II, Classification Terminology, Rule 5. Division of Payroll. This rule states:
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The division of an employer’s payroll between two or more classifications is made in accordance with the provisions of the “Multiple Enterprises” rule, or as directed by specific classification footnotes or phraseologies. Division of payroll requires that the employer keep complete and accurate payroll records, supported by original time cards or time book entries, segregating the payroll earned in the various activities. |
With the exception of Farms Industry classifications noted below, the specific requirements for dividing an individual employee’s payroll between classifications are listed at Section V, Rule 3, Division of Single Employee’s Payroll.
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3. Division of Single Employee’s Payroll When any location of an employer’s business is classified on a divided payroll basis in accordance with the provisions contained herein, the remuneration of any one employee may be divided between two or more classifications, provided the employer has maintained complete and accurate records supported by original time cards or time book entries which show separately, both by individual employee and in summary by operations performed, the remuneration earned by such employee, except such division SHALL NOT BE ALLOWED:
If the employer fails to keep complete and accurate records as provided in this rule, the entire remuneration of the employee shall be assigned to the highest rated classification applicable to any part of the work performed by the employee. Payroll may not be divided by means of percentages, averages, estimates, or any basis other than specific time records. If the employer’s business is classified on a divided payroll basis as defined in this rule, payments, such as vacation pay and bonus pay, made on a basis other than actual hours worked shall be apportioned among the classifications applicable to the employee’s payroll based on the actual per hour earnings in the classifications. |
This rule establishes that an employee’s payroll can only be divided based on recorded time. It is not sufficient to divide payroll based on estimates, or to simply designate that a particular type of payroll was earned in one activity or another. For example, it is incorrect to conclude that an employee’s salary is assigned to one classification and the same employee’s sales commissions are assigned to a different classification.
With regard to construction industry employers, similar requirements are found at Section IV, Special Industry Classification Procedures, Rule 2, Construction or Erection Work:
| Division of payroll shall be made for each separate and distinct type of construction or erection operation that is specifically described by a classification, provided separate records of payroll are maintained and provided the use of any such classification in connection with a separate job or location is not restricted by classification phraseology or footnotes. When the operations at a job or location are classified on a divided payroll basis, the remuneration of any one employee may be divided between two or more classifications provided the employer has maintained complete and accurate records supported by original time cards or time book entries which show separately, both by individual employee and in summary by operations performed, the remuneration earned by such employee. Operations for which separate records of payroll are not maintained shall be assigned to the highest rated classification applicable to the job or location if payrolls are kept separately by job within the policy period; otherwise, the highest rated classification shall be assigned based on the entire policy period. |
If an employee performs operations assignable to more than one classification and the employer has not maintained records to divide payroll based on time, the entire remuneration of the employee shall be assigned to the highest rated classification applicable to any part of the work performed by the employee.
With respect to Farms Industry classifications, the employee’s payroll may be divided based upon acreage, an employee’s time, or other reasonable methods. Refer to Section IV, Special Industry Classification Procedures, Rule 4, Farms, Subrule b, Payroll Division.
Related Information
California Workers' Compensation Uniform Statistical Reporting Plan—1995
Online Guide to Workers' Compensation
Classification Information
Future Editions
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