Wages paid to employees not actively working is nothing new. So how are wages handled for WC premiums if the employees aren’t actually working? Despite what many of us might think, determining what payrolls to charge for is not entirely to the carriers or auditors. This is actually up to the regulatory bodies in each state. For example, the Pennsylvania Compensation Rating Bureau specifically addresses “Idle Time” in their workers’ compensation manual.
PENNSYLVANIA WORKERS COMPENSATION MANUAL SECTION 1 UNDERWRITING RULES EFFECTIVE DATE: APRIL 1, 2015 Page 24
Wages Paid for Idle Time a. The entire amount of wages paid for idle time shall be included as payroll. b. Wages paid for idle time due to the following causes shall be assigned in their entirety to the classification which applies to the work normally performed by the employee involved: 1. Suspension or delay of work on account of weather conditions. 2. Delays while waiting for materials. 3. Delays while waiting for another contractor to complete certain work. 4. Delays arising from breakdown of equipment. 5. “Stand-by” time where employees such as operators of cranes, hoists or other equipment are on the job but their active services are not required continuously. 6. Special union requirements or agreements between employer and employees calling for pay for idle time under specified circumstances. 7. Other cause of similar nature. c. Wages paid to key employees of construction, erection or stevedoring risks, such as superintendents, foremen or engineers, for periods during which no jobs are in progress, shall be assigned to the classification applicable to the work which each one normally performs. (Exception: Reference Strike Periods – Wages Paid.) d. The entire amount of wages paid for idle time to an employee engaged in work other than construction, erection or stevedoring must be assigned without division to the classification which normally applied to that employee.
OK, with that being said, what presumably wasn’t expected when this was written was what we’re seeing today with COVID-19 and the federal assistance that has come with it. Fast forward to today and your company has just received a PPP Loan- Congratulations, let’s hope we can keep our businesses alive until things get back to normal… One of the keys to the PPP loan is to use at least 75% of the loan for payroll, even if the employees aren’t actively working. Well regardless of what type of company you have or the rate for your WC, your most likely hoping to NOT pay WC premiums on wages made to employees not actually working… I don’t blame you. So you talk to your carrier, broker, or an auditor to get the answer. Depending where you are or when you asked you may not like what you hear.
As a result, regulatory bodies are working hard to find a solution for this new type of wage payment.
NCCI recognizes that the circumstances around COVID-19 were extraordinary and, as a result, submitted an expedited rule change (Item Filing B-1441) to address the question of payroll for employees who are being paid but are not working as it relates to the basis of premium. Upon approval, this rule change will be distinct from “idle time” under our current Basic Manual rules (Rule 2-F-1), and a corresponding code 0012 will be created for reporting these payments. These payments will not be used in the calculation of premium.
The details of the rule changes proposed in Item Filing B-1441 were submitted to state regulators in all NCCI states.
https://www.ncci.com/Articles/Pages/Insights-Coronavirus-FAQs.aspx
Let’s start with the good news. Most states in the US have already approved a new classification code for payroll to be allocated for employees not working as a result of COVID-19 but still getting paid.
Disclaimer: This is an ever changing situation. Information is recorded as accurately as possible at the time posted. The information will continue to change and we’ll do our best to update accordingly. For the most accurate information check with your state rating bureau or commission.
Payroll during COVID-19 Code 0012 is approved in the following states as of May 4, 2020.
Alabama
Arkansas
Arizona
Colorado
Connecticut
District of Columbia
Florida
Georgia
Iowa
Idaho
Illinois
Indiana
Kansas
Kentucky
Louisiana
Maryland
Maine
Missouri
Mississippi
Montana
Nebraska
New Hampshire
New Mexico
Nevada
Oklahoma
Ohio Employers are not required to report to BWC the wages paid to employees who are idle at home because of the COVID-19 pandemic. Ohio is not using code 0012.
Pennsylvania – Just approved the exclusion of wages per circular released 5/5/2020. PA doesn’t use the same classification system, code 0012 is not applicable. PCRB CIRCULAR NO. 1740
Rhode Island
South Carolina
South Dakota
Tennessee
Utah
Vermont
West Virginia
To date (5/4/2020) the following states have not made an exception to the exclude wages paid for employees not working during COVID-19, or the exception just isn’t approved yet:
Alaska
California – The WCIRB is working to determine the scope of any emergency regulatory changes to be proposed to the California Insurance Commissioner. We anticipate completing this time sensitive effort within the next few weeks. Approval is in the works in California- https://www.wcirb.com/content/wcirb-july-1-2020-special-regulatory-filing
Delaware
Hawaii
Massachusetts
Michigan
New York
North Carolina- Pending Approval
Oregon
Texas
Virginia- Pending
Washington
Wyoming
Even if you find yourself in one of the states on the second list, it’s highly recommended you record any payroll made to employees not actively working- OR ANY other payroll abnormalities due to COVID-19. There may be options available come policy audit and it’s easier to have the breakouts done prior to the audit than trying to go back and recreate the records.
Many of the states have legislation pending, even if it’s not found on the commission or bureau site at this time. Track it so if it is approved, you don’t pay WC premiums where you shouldn’t have to!
