Maintaining Adequate Records
Premium savings can be obtained by way of proper record keeping. For construction or erection companies, the payroll of an individual employee may be divided and allocated to more than one classification (subject to the rules and limitations of each individual classification). If payroll records are not maintained providing these divisions, payroll for these employees must be assigned to the highest rated classification representing any part of their work.
Another example of premium savings through proper record keeping would be the exclusion of premium overtime. Records should be maintained to show premium overtime by individual and/or classification. If overtime is not properly maintained in your records, this deduction cannot be used.
Thus, it is very important to maintain adequate records. Some examples of the records needed to be maintained for the premium audit include but are not limited to:
- Payroll journals or other type records: Proper records will maintain gross payroll by company, individual, and classification. Overtime will be maintained providing a year to date breakdown by classification and/or employee. Other deductions will be separated in the records for deduction by the auditor. Examples are: Tips for restaurants, hand tools allowances, automobile allowances, among others. If the records do not indicate these separations, these deductions cannot be allowed. Consequently, if classification payroll breakdowns are not maintained, all payroll is assigned to the highest rated classification on your policy. Estimated payroll breakdowns are not acceptable to the Fund.
- Quarterly Federal & State Wage Reports: (If filed by your company) Should be provided to the auditor at the time of the audit. Auditors must verify gross payroll by way of a second source of records other than journals or other type of records. If there is a discrepancy between the audited records and Quarterly reports, the auditor will, on some occasions, use a third source of records to determine the gross payroll of your company or an individual’s payroll. Some examples of a third source for payroll verification could be: W-2’s and W-3’s, 1040 Federal Tax Returns, Corporate Tax Returns, among others.
- Cash Disbursements Journals: Used by the auditor to: 1) verify payroll amounts if other records are not maintained or available, and 2) used to procure and/or verify payments made to contract or casual laborers. Contract or casual labor is chargeable for Workers’ Compensation purposes. A number of claims are filed by these laborers every year and premium must be developed for this exposure. If cash disbursements journals are not maintained by your company, other examples of records the auditors might request are: check book registers, 1099’s, 1096’s, etc.
- Subcontractor Costs and Certificates of WC Insurance: A yearly summary for subcontractors should be maintained providing the following information:
- Name, total contract cost, and type of work performed for each subcontractor, monthly if possible.
- Certificates of insurance for Workers’ Compensation coverage. If the subcontractor does not have coverage, invoices (on the subcontractor’s own letterhead) providing materials/labor breakdowns should be provided to the auditor. A good rule all companies should implement is: Certificates of Insurance (COI’S) should be on file before a subcontractor begins the job. If they are uninsured, bills providing a materials/labor breakdown should be procured. Obtaining certificates of insurances will avoid any surprises at audit time and protect your company if an unfortunate accident were to occur.
For other information pertaining to the charging of uninsured subcontractors, please see the uninsured subcontractor page.
Please note: If you are on a monthly reporting basis: Your monthly reports do not constitute adequate records for classification breakdowns. Auditors will be developing payroll from the records you used to develop the amounts on your monthly reports. Records other than the monthly payroll records must be maintained or all payroll would be placed in the highest rated classification.