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. Therefore the Policyholder Ombudsman often receives questions about the types of compensation that are included in the computation of workers’ compensation premium.
Other than the specific exceptions cited in Part 3, Standard Classification System, Section V, Payroll—Remuneration, Rule 1, Payroll—Remuneration, of the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 (USRP), all money and substitutes for money earned during the policy period by employees and officers covered under the policy is included as payroll in the premium computation, including gross wages, salaries, commissions, bonuses, overtime payments, the market value of gifts and vacation, holiday and sick pay.
A helpful reference is Appendix II, Payroll/Remuneration Table, of the USRP, which is a comprehensive list of types of compensation and whether they are considered payroll/remuneration. The list below contains common types of compensation.
Remember that the Policyholder Ombudsman is available to assist you if you have any questions about the rules governing payroll/remuneration or a dispute with your insurance company regarding a type of compensation included as payroll/remuneration included in your workers’ compensation premium computation.
Common Types of Compensation
Type of Compensation | Is Payment Included as Payroll? | Comments |
| Sick Pay | Yes | Payments by the employer. |
| Accumulated Sick Pay | Yes | Payment of accumulated or accrued sick leave usually is made upon the employee’s termination and is considered to be pay to which the employee would have been entitled had s/he remained employed. Include as payroll unless sick pay was accrued during periods that the employer was legally self-insured. |
| Vacation Pay | Yes | |
| Accumulated Vacation Pay | Yes | Payment of accumulated or accrued vacation usually is made upon the employee’s termination and is considered to be pay to which the employee would have been entitled had s/he remained employed. Include as payroll unless vacation pay was accrued during periods that the employer was legally self-insured. Sick, vacation and holiday pay are included in the wages paid directly to the employee and are therefore deemed compensation. |
| Bonuses | Yes | |
| Family Leave | Yes | |
| Value of Housing/Lodging – when the classification phraseology or other rules of the Standard Classification System include lodging | Yes
| Include the value as specified by Standard Classification System rules or classification phraseology or footnotes. |
| Value of Housing/Lodging – when the classification phraseology or other rules of the Standard Classification System are silent regarding lodging | No | When housing/lodging is provided expressly in lieu of wages, or the employee’s wages are reduced by an amount equal to the value of the lodging, include the value of the lodging. |
| Meals Provided Free to the Employee | No | Exclude the value of meals even though it may be added to the employee’s wages for tax purposes. |
| Meals Purchased by the Employee | Yes | Include if the employee purchases meals from the employer and the cost of the meals is shown as a payroll deduction or the meals are provided in lieu of wages. |
| Overtime Payments | Yes (see Comments) | The portion of overtime payments representing the regular rate of pay shall be included as payroll. The Premium Portion of Overtime Pay shall be excluded from the payroll only in the following situations:
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| Tips – Pre-paid tips and voluntary tips | No | See USRP, Part 3, Section V, Rule 1d. |