When it comes to workers’ compensation insurance, how you classify your payroll can make a massive difference in your premiums. Many New York contractors unknowingly overpay for coverage simply because they don’t separate their payrolls by class codes. For businesses performing multiple trades, such as asbestos abatement contractors who also handle interior demolition, insulation, and other services, correctly splitting payrolls can mean the difference between a reasonable premium and an astronomical one.
This article will explore why payroll separation is crucial, how to properly set up your bookkeeping to ensure compliance, and how BGES Group can help contractors get the best workers’ compensation solutions.
Why Separating Payrolls by Class Codes Matters
Workers’ compensation insurance premiums are based on payroll and job classification codes assigned by the National Council on Compensation Insurance (NCCI) or the New York Compensation Insurance Rating Board (NYCIRB). Each trade or role in a company is assigned a specific class code, with some codes carrying significantly higher rates than others.
Let’s take the example of an asbestos abatement contractor who performs multiple trades:
- Asbestos Removal (5473) – A high-risk class code with one of the most expensive workers’ compensation rates.
- Interior Demolition (5403) – Another high-risk category, though often lower than asbestos removal.
- Insulation Work (5479) – While still construction-related, insulation work may have different rates than asbestos removal.
- Supervisory (5606) – Contractor executive supervisors who do not perform manual labor can be classified under this lower-rated code.
- Clerical (8810) – Office employees who never set foot on a job site are classified under this ultra-low-cost class code.
If a contractor fails to separate payrolls properly, insurance carriers often default all wages to the highest-rated classification—meaning your entire payroll could be charged under the costly asbestos removal rate. This mistake could cost tens of thousands of dollars in excess premiums annually.
By splitting payrolls correctly, businesses can ensure each employee’s wages are assigned to the appropriate (and lowest applicable) classification, significantly reducing insurance costs.
How to Properly Separate Payrolls for Workers’ Compensation
Insurance auditors will scrutinize payroll records to ensure proper classification. If payroll is not meticulously recorded, they will automatically classify all wages under the most expensive category. To avoid this, contractors should implement the following best practices:
1. Maintain Detailed Payroll Records
- Record each employee’s hours and job duties separately.
- Use time-tracking software that allows employees to log specific tasks or trades they performed.
- Have supervisors verify and approve job classifications daily or weekly.
2. Use Job Costing Codes in Accounting Software
- Set up job costing codes within accounting and payroll systems to reflect different class codes (e.g., QuickBooks, Sage, or specialized construction accounting software).
- Each payroll entry should specify the exact work performed under the correct classification.
3. Clearly Define Employee Roles
- Employees should be trained on how job classification works.
- Supervisors should ensure workers are not performing multiple trades under a single shift unless necessary.
- Ensure that executive supervisors (5606) and clerical employees (8810) do not engage in manual labor. Even one instance of a clerical worker visiting a job site and performing labor could reclassify their entire payroll at a higher rate.
4. Require Accurate Time Cards
- Utilize electronic time cards or job logs that specify the nature of work completed.
- If using manual logs, ensure they are legible, signed, and retained for audits.
5. Work With a Workers’ Compensation Specialist
- Insurance carriers conduct audits annually, and misclassified payrolls can lead to massive additional premiums and penalties.
- A specialist like BGES Group can ensure your classifications are correct before an audit takes place, helping to prevent unnecessary costs.
How BGES Group Helps New York Contractors Save on Workers’ Compensation
BGES Group is one of New York’s top workers’ compensation insurance specialists. With over 40 years of experience, they help contractors navigate the complex world of workers’ compensation, ensuring proper payroll classification, lower premiums, and audit compliance.
Why Contractors Trust BGES Group:
- Expert Classification Assistance – They analyze your business operations and payroll records to ensure correct class codes, preventing overcharges.
- Exclusive Workers’ Comp Programs – BGES Group offers special programs for high-risk contractors, including asbestos abatement, roofing, demolition, and insulation.
- Audit Support & Dispute Resolution – If you’re hit with an unexpected premium increase after an audit, BGES Group fights on your behalf to get it corrected.
- Payroll Services with Workers’ Comp Integration – They offer payroll solutions that automatically classify employees correctly, ensuring compliance and minimizing risk.
By working with BGES Group, contractors can save thousands of dollars annually by avoiding misclassifications and securing the most competitive workers’ comp policies available.
Contact BGES Group Today
Don’t let improper payroll classification drain your profits. If you’re a New York contractor looking to lower your workers’ compensation costs, BGES Group can help.
📞 Call Gary Wallach at 914-806-5853
📧 Email: bgesgroup@gmail.com
🌐 Visit: bgesgroup.com
With BGES Group on your side, you’ll get expert guidance, lower premiums, and the best workers’ compensation solutions tailored to your business. Reach out today to start saving!