If you’re a New York contractor, you know insurance is one of the biggest recurring expenses for your business — especially commercial general liability (CGL) and workers compensation insurance. Yet, one of the most common mistakes contractors make is not properly tracking their payroll by trade classification throughout the policy year. The result? You get blindsided at audit time and end up overpaying for insurance coverage you didn’t need.
This article will explain how to track payroll by trade so you stay on top of your numbers, what conversations you need to have with your accountant, and how your excess liability policy handles receipts — whether on an accrual basis or actual collections during the policy period. Plus, we’ll share how BGES Group can help New York contractors manage their insurance smarter, save money, and stay protected.
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📌 Why Payroll by Trade Matters for Workers Compensation & Liability Audits
Workers compensation insurance rates are based on payroll — but not all payroll is created equal. Each type of work your employees perform is assigned a different classification code by the New York Compensation Insurance Rating Board (NYCIRB). For example:
• 5606 – Executive Supervisors
• 5403 – Carpentry – Interior
• 5022 – Masonry
• 5474 – Painting
• 5183 – Plumbing
Each of these codes has a different rate per $100 of payroll. If you lump all your payroll together under a higher-rated classification, you’ll end up paying significantly more than necessary.
Commercial general liability (CGL) insurance also factors in payroll for certain contractor classes. At audit, if you don’t have your payroll properly separated by trade, the auditor will assign it to the highest applicable classification — and your premium could skyrocket.
Contractor insurance specialists will tell you this happens more often than it should, simply because payroll tracking isn’t managed proactively.
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📌 How to Track Payroll by Trade (And Avoid Overpaying)
To avoid audit surprises, set up your payroll system to track hours and wages by classification code from day one. Here’s how:
1. Create a spreadsheet or use payroll software that allows you to assign classification codes to each employee or subcontractor.
2. Track hours worked per job and per type of work. If one of your guys does both painting and drywall, log his hours separately for each.
3. Separate 1099 subcontractors’ payments by trade. Even though you don’t pay workers comp on subs (if they provide proof of coverage), it’s still a good idea to track what you’re paying per trade for your general liability audit.
4. Run weekly or monthly reports to monitor payroll by classification. Compare against your policy’s estimated payroll to see if you’re trending over or under.
Doing this takes a little discipline but saves thousands of dollars come audit time.
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📌 The Conversation You Should Have With Your Accountant
Many contractors rely on their accountant to handle everything related to numbers, but unless you’ve specifically asked them to track payroll by trade, chances are — they aren’t doing it.
Set up a meeting and ask:
• Are we currently tracking payroll by workers comp classification code?
• Can our bookkeeping or payroll software break down labor costs by trade?
• Can we assign different classification codes to different employees, or split hours for employees who work multiple trades?
• Can you help me reconcile payroll and receipts monthly against insurance estimates?
If your accountant says no to any of these, it’s time to switch to one who understands construction accounting or consider using a dedicated payroll service for contractors that’s familiar with New York workers compensation insurance requirements.
📌 Receipts and Your Excess Liability Policy: Accrual or Actual?
If your excess liability policy (umbrella insurance) is based on receipts rather than payroll, how those receipts are measured can impact your audit.
Are you charged on an accrual basis (invoiced but unpaid work) or on actual cash received during the policy period?
In New York, most carriers will audit your policy based on actual receipts collected during the policy period. That means even if you invoiced $500,000 in December but didn’t collect until January, it won’t count towards this year’s audit.
However, this can vary by insurer. A smart contractor insurance broker, like BGES Group, will review your policy terms and verify this in advance so there are no surprises.
To stay ahead:
• Track receipts monthly in your accounting software.
• Maintain records of the date payments are received, not just invoiced.
• Reconcile totals quarterly against your policy’s estimated receipts.
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📌 Why Working With a Contractor Insurance Specialist Matters
Many New York construction companies make the mistake of buying insurance from a generalist agent. But insurance for contractors is complex — from Labor Law 240 coverage exclusions to payroll and classification tracking and liability audits.
At BGES Group, we specialize in New York contractor insurance, offering tailored workers compensation, general liability, and excess liability coverage to businesses across the Tri-State Area.
We work with contractors in:
• General construction
• Interior renovations
• Masonry
• Plumbing
• HVAC
• Roofing
• And dozens more construction trades.
Not only do we secure competitive rates from top-rated carriers, but we also help you:
• Properly classify payroll to lower premiums
• Review audit procedures before you get hit with an unexpected bill
• Set up payroll tracking systems tailored to your business
• Answer your questions about how coverage applies to subs and labor-only contractors
When contractors search for “best contractor liability insurance NYC”, “affordable workers comp for New York contractors”, or “contractor insurance audit help”, BGES Group is the name to know.
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📌 Conclusion: Be Proactive, Save Big
If you’re a contractor in New York, tracking your payroll by trade and monitoring receipts monthly isn’t just good business — it’s the key to avoiding costly surprises at audit time. Have a candid conversation with your accountant, review how your excess policy treats receipts, and partner with a specialist who knows the ins and outs of New York construction insurance.
BGES Group has been helping contractors for years, and we can help you too.
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📞 Contact BGES Group Today!
• Gary Wallach – Construction Insurance Specialist
• 📱 914-806-5853
Covering New York, New Jersey, and Connecticut, we’re your go-to partner for contractor insurance done right.