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By Jimmy Norton, CPCU
The COVID-19 pandemic has affected us all in dramatic ways. Companies have closed their doors or reduced operations out of public health concerns. Employees were furloughed or laid off until businesses could operate safely. Fortunately, disaster assistance programs like the PPP helped employers keep people on the payroll during the pandemic.
If you carry a Workers’ Compensation policy, you will soon face your annual audit. The Insurance Auditor will want to see your actual payroll records for the policy term. Here are a few important things to remember if you paid employees to stay home or perform different duties.
Workers’ Compensation policy premiums are based on gross payroll assigned to different classifications based on the type of work performed. Each classification carries a different rate based on the hazards associated with it. How do you classify an employee who sits home while on a paid furlough from work? Ratemakers in the insurance industry feel they have an answer to this question. The National Council on Compensation Insurance (NCCI) announced that payroll for paid furloughed employees can be classified under a special code – 0012. This rule was put in place effective 3/1/20 and will run until 12/31/20. This expiration may be extended depending on the circumstances.
In addition to furloughs, many companies have had to dramatically alter their operations due COVID. If employees were placed in new roles during this time, then companies may be able to reclassify them into different categories. For example, a salesperson moved from outside sales to inside sales while quarantining at home. Chesapeake Employers Insurance provides other examples:
EXAMPLE: A retail store that remains open for delivery of goods but closes the showroom to consumers. Several of the retail showroom employees work from home to assist with phone orders, customer service calls, and related clerical paperwork. These employees may be reassigned to Code 8871—Clerical Telecommuter Employees. In addition, this same employer has other showroom employees delivering goods to customers. These employees would be reassigned to Code 7380—Drivers, Chauffeurs, Messengers, and Their Helpers NOC—Commercial while they are in their new role as delivery drivers. In both situations, the employees’ original job descriptions were included in the applicable store code, but their new job descriptions place them in a new code. Once the employees return to their former roles after the pandemic has passed, their payroll would return to the store code that was assigned before the employer closed the showroom.
In many cases, employees performing more hazardous work will be assigned to less hazardous work due to a change in the company operations. This means that employee’s payroll will go from a higher Work Comp rate to a lower Work Comp rate.
It will be important to notify Insurance Auditors about changes in employee duties as well as paid employees who stayed home on furlough. Auditors WILL REQUIRE that companies maintain separate payroll records, so make sure to start tracking this now. It will be much easier to track the changes now than to have to look back and recalculate at audit time. As with any audit, if separate payroll records are not maintained, then employee payroll is assigned to the highest rated applicable classification.
Good luck and please contact us here at Brock-Norton if you have any questions.
For more information on NCCI’s changes, you can visit their COVID-19 page here: https://www.ncci.com/Articles/Pages/Insights-Coronavirus-FAQs.aspx
Brock-Norton’s website has other COVID-19 information and resources, too. http://www.brocknorton.com/covid-19.html