As employers are struggling to maintain business operations, or are confronting a full or partial shutdown, every cost and expense is being closely scrutinized. The organization that regulates workers’ compensation rates, NCCI, recently published some FAQs for employers and carriers about the COVID-19 situation. Individual states will approve and interpret the NCCI rules, and insurance carriers will need to follow any state regulatory and enforcement changes.
Several clients have asked an important question related to cost saving. Is the payroll paid to employees that are staying home and not working (such as under the Payroll Protection Program) included in the premium calculations of its workers’ compensation policies?
On April 17, an NCCI update stated: NCCI recognizes that circumstances around COVID 19 are extraordinary and warrant an expedited rule change to address the question of payroll for employees who are being paid but are not working as it relates to the basis of premium. If approved, this rule change will be distinct from “idle time” under our current Basic Manual rules (Rule 2-F-1), and a corresponding statistical code 0012 will be created for reporting this payroll. This payroll will not be used in the calculation of premiums. Other actions are underway by some companies and individual states to respond to this question, so an emphasis on creating as uniform an approach as possible is being pursued for approval by regulators. The details of the proposed rule changes will be included in a filing that will be submitted to state regulators in all NCCI states. The filing is expected to be made the week of April 20.
According to Duke Mills of WorkComp Solutions Inc., it is critically important for employers to code the payroll for non-working, stay at home employees in a way that can be easily identified during your year-end premium audit. Remember, your auditor may not bring it up, so you should keep a note about it so you can request this payroll be excluded from your premium calculation. Duke says that WorkComp Solutions attends the workers’ compensation audits for clients to ensure that all proper deductions and offsets are applied to the premium calculation.