Workers’ compensation insurance is a crucial requirement for New York contractors. It provides coverage for employees in case of work-related injuries or illnesses and protects employers from costly liability claims. However, one of the key factors influencing your workers’ compensation premiums is the accurate classification of payroll according to trade-specific codes. The New York Compensation Insurance Rating Board (NYCIRB) establishes these rules, which determine the rates contractors pay for workers’ compensation insurance.
This article explains how payroll classifications work, strategies for splitting payroll among various classification codes, and tips for small contractors to save on premiums while remaining compliant. We’ll also highlight how BGES Group, experts in workers’ compensation insurance for New York contractors, can help you navigate this complex process.
What Are Workers’ Compensation Payroll Classifications?
In New York, the NYCIRB assigns classification codes to specific types of work performed by employees. Each classification code has a corresponding rate based on the risk level of the job. For example:
• Carpentry (5403) typically has higher rates due to the inherent risks of working with tools and at heights.
• Painting (5474) may have slightly lower rates depending on the scope of work.
• Tile Installation (5348) might be even less expensive due to the relatively lower risk of injury.
Contractors must categorize payroll correctly to ensure they are paying the appropriate rate for each type of work performed. Misclassification can result in audits, fines, or higher premiums, especially if all payroll is lumped into the highest-rated classification.
How to Split Payroll Among Classification Codes
For contractors performing various trades, splitting payroll into appropriate classification codes is essential to avoid overpaying on premiums. The NYCIRB allows payroll splitting under specific conditions:
1. Accurate Records: Contractors must maintain detailed records showing the time employees spend on each type of work.
2. Job-Specific Allocation: Employees’ payroll can be divided among different classification codes if the records clearly indicate the time spent on each trade.
3. Audit Preparation: Payroll records must be clear and verifiable during audits to ensure proper classification.
Examples of Payroll Splitting for Multi-Trade Contractors
Here are three examples of how a contractor performing multiple trades can split payroll to optimize workers’ compensation premiums:
Example 1: General Contractor Doing Carpentry, Painting, and Tile Work
A contractor employs three workers who perform carpentry, painting, and tile installation on a renovation project.
• Worker A (Carpentry): Spends 50% of their time on carpentry tasks (5403) and 50% on painting tasks (5474).
• Worker B (Painting): Spends 70% of their time painting (5474) and 30% on tile work (5348).
• Worker C (Tile Work): Works exclusively on tile installation (5348).
To split payroll effectively:
• Track hours daily for each task using timesheets or job-costing software.
• Assign payroll based on the time spent in each trade.
By doing this, payroll is allocated to the appropriate classification codes, ensuring that not all wages are categorized under the higher-risk, higher-cost carpentry code.
Example 2: Small Contractor Managing Different Projects
A small contractor handles projects with varying scopes, such as remodeling (carpentry-heavy), interior painting, and bathroom tiling. They employ one worker for all trades.
• Week 1: Worker spends 40 hours on carpentry (5403).
• Week 2: Worker spends 20 hours on painting (5474) and 20 hours on tile work (5348).
To allocate payroll:
• Record hours worked per task per week.
• Apply the appropriate classification codes to each type of work.
This strategy prevents all payroll from being classified under carpentry, which has the highest rate.
Example 3: Subcontractor Hired for Specialized Tasks
A subcontractor provides services for tile installation and painting.
• The subcontractor’s payroll should be split based on the scope of work in their contract.
• Accurate documentation, such as invoices detailing work performed, can justify payroll allocation.
How Small Contractors Can Split Payroll in Their Books
Splitting payroll effectively requires a disciplined approach to recordkeeping. Here are some practical tips:
1. Use Job-Costing Software: Platforms like QuickBooks or other construction-specific software allow you to allocate payroll based on tasks performed.
2. Maintain Daily Timesheets: Ensure workers log their hours daily, detailing the type of work they performed.
3. Communicate with Your Insurance Carrier: Work with your insurance provider to understand classification rules and ensure compliance.
4. Review Classification Codes Annually: Payroll classifications may need adjustments based on changes in the scope of work.
By following these steps, small contractors can avoid overpaying for workers’ compensation insurance and stay audit-ready.
Why Choose BGES Group for Workers’ Compensation Insurance?
Navigating the complexities of workers’ compensation insurance payroll classifications can be overwhelming. That’s where BGES Group comes in. We are specialists in workers’ compensation insurance for New York contractors, providing personalized solutions to ensure you’re paying the right amount without compromising coverage.
Here’s why contractors trust us:
• Expert Guidance: We help you understand and apply the correct classification codes for your business.
• Audit Preparation: Our team ensures your payroll records are accurate and compliant with NYCIRB rules.
• Tailored Policies: We customize workers’ compensation insurance plans to fit your business needs.
If you need help obtaining new coverage or have questions about workers’ compensation insurance, contact BGES Group today.
Contact Information
BGES Group is your go-to partner for workers’ compensation insurance solutions. Call or email us today to learn how we can help your business.
• Gary Wallach
• Phone: 914-806-5853
• Email: bgesgroup@gmail.com
Optimize Your Workers’ Compensation Insurance with BGES Group
Don’t let misclassified payroll inflate your workers’ compensation premiums. With proper recordkeeping and expert advice from BGES Group, you can reduce costs while maintaining compliance. Whether you’re a general contractor, subcontractor, or small business owner, our team is here to provide the support and expertise you need.
For affordable and customized workers’ compensation insurance for New York contractors, contact BGES Group today.
By focusing on accurate payroll classification, leveraging NYCIRB rules, and partnering with experienced professionals, New York contractors can optimize their workers’ compensation insurance and protect their bottom line.