Below are common payroll items to consider for Workers’ Compensation premiums. Items subject to state exceptions are noted, particularly in New Jersey. Be sure to check the specific inclusions and exclusions for your state.
Payroll Inclusions for Workers’ Compensation Premium
- Wages or salaries including retroactive wages or salaries
- Commissions and draws against commissions
- Bonuses including bonus plans*
- Straight time portion of overtime*
- Pay for holidays, vacations, or sick-paid by employer*
- Payments by an employer of amounts otherwise required by law to be paid by employees to statutory insurance or pension plans, such as the Federal Social Security Act
- Payments to employees for piece work, profit sharing, or incentive plans
- Payments or allowances for hand tools or power hand tools provided by the employees and used in their work operations*
- Rental value of an apartment or house provided for an employee (permanent lodging – based upon comparable accommodations)*
- The value of meals received by employees as part of their pay to the extent shown in the employer’s records*
- The value of store certificates, merchandise, credits, or any other substitute for money received by employees as part of their pay
- Payments for salary reduction, retirement, or cafeteria plans (IRC125) that are made through deductions from the employee’s gross pay
- Davis-Bacon wages paid to employees or placed into third-party pension trusts (wages paid above employee’s normal pay to meet prevailing wages for government jobs).*
- Expense reimbursements to employees to the extent that an employer record does not substantiate that the expense was incurred as a valid business expense*
- Jury Duty Pay
*Subject to State Exceptions
Payroll Exclusions for Workers’ Compensation Premium
- Premium portion of overtime, premium pay is the extra money paid to employees for working overtime. If overtime is paid at time and a half, one-third would be excludable as premium pay If overtime is paid at double time, half would be excludable as premium pay*
- Note: an overtime credit is not permissible in PA, DE, UT, and NV. Also, note that increased wages for time differentials such as extra pay for night shifts are not considered overtime.
- Stock options (Stock given as a bonus or as a substitute for a wage is chargeable)
- Severance pay (Accrued vacation is not considered severance pay)*
- Third-party sick pay
- Expense reimbursement to the extent that the employer’s records substantiate that the expense was incurred as a valid business expense and that the amount of each employee expense reimbursement is shown separately in the records of the employer (Note: NJ is an exception – non-business expense reimbursement is included)
- Moving expenses
- Value of special rewards for individual invention or discovery*
- Tips and gratuities* (Note: NJ is an exception – tips and gratuities are included)
- Payments by an employer to group insurance or pension plans
- Payments for active military duty*
- Employee discounts on goods purchased from the employee’s employer
- Supper money for late work
- Work uniform allowances
- Employer-provided perks such as use of an automobile (taxable amount for personal use of auto), an airplane flight, an incentive vacation (contest winner, etc.), a discount on property or services, club memberships, tickets to entertainment events*
- Flex-Credits – when a specific amount is set aside for employees for the employee to purchase group insurance, any portion that is used to purchase the insurance is excluded. Any amount that the employee receives that is not used to purchase the insurance would not be excludable
- Travel time (Note: NJ only)
*Subject to State Exceptions
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Source: E-COMP
