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Remuneration and Payroll Used for Workers Compensation

A Workers Compensation Term Definition

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Remuneration and Workers Compensation Payroll...Scroll down for the list of included items

To pay an equivalent to for service or loss or expense. Remuneration is the act of compensating. From a workers compensation perspective rumuneration is the exposure basis used in the premium calculation process.

What is payroll or remuneration and how does it effect workers compensation premium.

Simple dictionary definitions of Payroll and Remuneration:
  • Payroll:
    • 1. A list of employees to be paid for services rendered; 2. Meaning to give money, amount to be paid

  • Remuneration:
    • 1. To give or pay for some work or service done; 2. To make up for, to compensate

Remuneration, it's not a word you run across every day! But it has an enormus effect on the pricing of a workers compensation insurance policy. Many insurance agents, their clients and even some insurance company personell believe that payroll is the rating base for a workers comp policy, and they would be wrong. Payroll is merely a part of the overall category of remumeration. There are many other items that fall under this term. Many other items most would not consider a form of compensation or even consider being included in the rating basis for a workers comp policy.

So for the purpose of workers compensation, payroll means money or substitutes for money. Workers Compensation policies will always refer to the term remuneration. Payroll, the most common item included in remuneration, is however not the only item. We have provided below a list of items that NCCI includes as payroll. You'll see in our list there are many "non-money" items that are considered payroll. We've also provided a list of those items typically not included as payroll.

According to NCCI rules, remuneration means money or a substitute for money and includes:
  • Payroll - wages and salaries;
  • Commissions and draws against commissions;
  • Bonuses
  • Extra pay for overtime as defined and outlined in their rule V-E;
  • Holiday, vacation and sick pay;
  • Payment by employer into statutory insurance and/or pension plans...read Social Security;
  • Payment for piecework, profit sharing or other incentive plans;
  • Payment, compensation or allowance for tools used in work;
  • Value of rental of apartment or house, provided for an employee;
  • Value of other lodging an employee receives as part of their pay;
  • Value of meals to employees as part of their pay;
  • Value of store certificates, credits or merchandise or other money substitutes received as part of pay;
  • Payments for salary reduction, employee savings plans etc as made through employee authorized salary reduction;
  • Davis-Bacon pay or pay from other prevailing wage law;
  • Annuity plans;
  • Expense reimbursement to employees where employer records do not indicate a valid business expense;
  • Payment for filming commercials excluding residuals.
As you can see, more items make up remuneration than just payroll. And to confuse things, not all states follow these exact items! Remember, workers compensation is state controlled.

Here's a list of items typically NOT treated as Payroll or Remuneration under NCCI rules:
  • Tips and other gratuities received by employees;
  • Payments by an employer to group insurance or group pension plans for employees - as allowed by NCCI rules;
  • Payments by an employer into third party trusts for the Davis-Bacon Act or similar prevailing wage law qualified trust (Be careful with this one, health, welfare and fringe benefits ARE considered remuneration, see above.);
  • The value of special rewards for individual invention or discovery;
  • Severance payments except for time worked;
  • Payments for active military duty;
  • Employee discounts on items purchased from the employer;
  • Supper meal payments for late work;
  • Uniform allowances;
  • Certain employer provided perks such as:
    • Use of company vehicles;
    • Airline flights or use of private plane;
    • Incentive travel;
    • Discounts for services;
    • Club memberships;
    • Tickets to entertainment events;

For most states, NCCI or the National Council on Compensation Insurance outlines the rules and definitions of payroll as used for workers compensation premium computation. One of two basic premium exposures for a workers compensation policy is payroll (remuneration.) When your policy is first set up, the policy premium is based on an estimated exposure. After the policy expires, the actual payroll exposure for the policy period will be determined by the audit. The auditor will gather the actual payroll information and submit that information to your workers compensation insurance company where they will recalculate your workers compensation premium and send you a bill for the difference. But you can learn more about that process in our section about audits.

At the time this definition was compiled these states are known to make exceptions to this list: Alaska, Arizona, Colorado, Florida, Kansas, Kentucky, Louisiana, Maine, Minnesota, Montana, New Mexico, Nevada, Oklahoma, Oregon, South Dakota, Tennessee, Virginia, Wisconsin.

So just remember, remuneration may mean more than just payroll.

Please keep in mind this general information is provided for your use and may or may not apply in your state of residence. Workers compensation laws, rules and governing bodies are state specific. Please contact our office for more specific workers compensation information for your state.

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