SAVE ON WORKERS’ COMPENSATION INSURANCE PREMIUMS
Overtime Pay Can Be Excluded

By Damon M. Ribakoff

California Labor Code 510 requires a non-exempt employee to be paid wages at time and a half the regular rate of pay after (1) forty hours of work in one week, (2) eight hours of work in one day, or (3) the seventh consecutive day in any work week. Wages at double the hourly rate are required after twelve hours in a single day.

However, for purposes of computing workers’ compensation insurance premiums, you should exclude the overtime “surcharge” and only use the regular rate of pay for both regular and overtime hours. For example, if an employee is paid $10.00 an hour and works forty-one
hours in one week, the total payroll to report would be $410 rather than $415.

41 hours @ $10.00=$410
vs.
40 hours @ $10.00 + 1 hour @ $15.00=$415

In order to exclude the overtime “surcharge,” you must properly maintain your books and records in accordance with the Uniform Statistical Reporting Plan. In this regard, Part 3, Section V, Rule 1(c) of the Uniform Statistical Reporting Plan provides that the overtime “surcharge” is excluded from premium computations if the employer’s books and records are maintained to show separately by employee: (1) pay earned at regular rates for total hours worked, and (2) overtime remuneration.

Alternatively, one third of the total pay for hours worked when there is overtime is excluded if the employer’s books and records are maintained to show separately by employee: (1) pay earned at regular rates for total hours worked when there is no overtime, and (2) total pay earned for those hour worked when there is overtime.

Organization is critical in avoiding payroll audit problems with your workers’ compensation insurance carrier. Poorly organized records will often cause an overworked auditor to include payroll that should otherwise be excluded. Therefore, ensure that the overtime “surcharge” is not included in the computation of premiums by properly organizing your payroll records.

 

^ TOP