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Payroll or Remuneration

Special Announcement Regarding Payroll and COVID-19

In response to the COVID-19 crisis, we have initiated work with our stakeholders to identify potential regulatory changes with respect to payroll reporting and the classification of payroll and claims. One immediate focus is on assessing what changes may be appropriate to address the following increasingly prevalent situations:

  1. Policyholders paying furloughed employees: In other words, paying employees whose job has been suspended due to the COVID-19 crisis. Addressing this requires a review the USRP requirement that, for basis of remuneration purposes, an employee’s 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.”
  2. Employees working from home with significantly different job duties: In some instances, this may include shifting employees who are typically engaged in non-clerical operations to roles that are exclusively clerical in nature due to the limitation of the work from home environment. Addressing this requires a review the USRP requirement that “It is not permissible to divide a single employee’s payroll, within a single policy period, between a Standard Exception classification and any other classification with the exception of a single permanent job reassignment.”

The WCIRB is working to determine the scope of any emergency regulatory changes to be proposed to the California Insurance Commissioner. We anticipate completing this time sensitive effort within the next few weeks.

Payroll or Remuneration

Once classification assignments have been made, payroll data is reported to the WCIRB based on these assignments. One of the primary components of the rate that an employer pays for its workers' compensation insurance policy is determined by the classification code(s) to which that payroll is assigned. Also, the items that constitute payroll when determining the basis of workers' compensation insurance premium are quite specific. Detailed information about what constitutes payroll, often referred to as remuneration, can be found in the Filings and Plans section.

When determining the basis of premium, the following are included as payroll:

  • Gross wages
  • Salaries
  • Commissions
  • All bonuses
  • Most profit sharing
  • Vacation, holiday and sick pay
  • Overtime ("straight time" portion only)
  • The market value of gifts
  • Automobile allowances (less reimbursement for documented expenses)

The following items are excluded from payroll when determining the basis of premium:

  • Meals or lodging (unless the classification phraseology specifically includes them or they are provided in lieu of wages)
  • Tips
  • Overtime excess pay (the increase above the regular hourly wage)
  • Severance pay (except for accrued vacation, sick pay, commissions and bonuses)
  • Employer contributions to qualified insurance, stock or retirement plans
  • Stock options
  • The value of an automobile furnished to an employee 

In addition, the following are not included as payroll for premium computation:

  • Employee discounts for merchandise
  • Residual payments for commercials
  • A uniform allowance

Payroll for workers' compensation insurance purposes is not necessarily the same as the Internal Revenue Service definition of payroll.

We welcome your feedback on this guide. Please send comments and suggestions to [email protected].