Three Levels Of Employees Can Help Lower Workers’ Comp Insurance Premiums

By Damon Ribakoff

Is your company paying too much money for workers’ compensation insurance because it is forced to pay the same rates for higher earning supervisors as for lower paid employees? If so, creating three levels of employees can help lower workers’ compensation insurance premiums.

Workers’ compensation insurers assign a specific rate to each occupational classification code under the Uniform Statistical Reporting Plan (USRP). The object of the classification system is to group employers into classifications so that each classification reflects the risk of loss common to employers conducting similar operations. Historically, problems arose regarding whether or not supervisors should be classified under the employer’s governing classification code or under one of the Standard Exceptions to the USRP. As a result, the USRP was amended this year to provide guidance as to how supervisors should be classified. Under the new rule, any supervisor whose work is necessary, incidental or appurtenant to any operations of the business is to be classified under the employer’s governing classification code.

The Standard Exceptions to the USRP include the 8810 classification code (Clerical Office Employees) and the 8742 classification code (Salespersons-Outside). Under the 8810 classification code, the duties of clerical office employees are confined to keeping books, records or cash of the employer, or who are wholly engaged in general office work and have no regular duty of any other nature in the service of the employer. However, if the clerical office employee is exposed to any operative hazard of the business or conducts any duties where work other than clerical duties are performed, then he or she would be classified under the employer’s governing classification code. In contrast, the 8742 classification code applies to employees who engage in sales or collection work away from the employer’s premises or who engage in such work for any portion of their time and devote the balance of their time in clerical office duties. Thus, the WCIRB will typically apply the 8742 classification code to a low risk position that involves a broad mix of clerical and sales duties which are performed both inside and outside of the employer’s place of business.

For example, the 8015 classification code applies to employees working within a wholesale or retail furniture store and, thus, all employees would be classified under the employer’s governing 8015 classification code unless certain positions fall within one of the Exceptions discussed above. Therefore, managers would be classified under the governing 8015 classification code since they supervise operations which have also been assigned the 8015 classification code. However, strong arguments can be made that a job position which oversees the performance of the managers, e.g. Operations Manager, and is not exposed to the same risks as managers should be classified under either the 8742 or 8810 classification codes. In such case, the Operations Manager could be paid a higher wage than the managers and would be responsible for directly supervising the managers as well as engaging in other low-risk clerical and sales duties.

It may make more economic sense to create these three levels of employees, pay the higher wages to an Operations Manager under a Standard Exception to the USRP, and save in workers’ compensation premiums. Refer to the chart below; the savings in premiums by creating three levels of employees can be substantial.
 

^ TOP