The Construction Employment Payroll Limitation Program New York State Insurance Fund Eligible Classifications Chargeable Payrolls Record-Keeping Requirements Territories & Surcharges Special Situations nysif.com Workers compensation & disability benefits specialist since 1914
Contents 1 What is the Construction Employment Payroll Limitation Law? What are the effects of the law? 2 Who and what qualifies under the law? 3 How does the limitation work? Eligible classifications Chargeable Payrolls 4 Record-keeping requirements 5 Special record-keeping situations and rules 6 New York territories and surcharges 7 Sample record-keeping for payroll separation 8 More special situations: Annual payroll, bi-weekly payroll and partial week payroll Sole proprietor s weekly draw When the limited payroll amount does not apply Experience rating NYCCPAP
What is the Construction Employment Payroll Limitation Program? The Payroll Limitation Program applies a maximum payroll limitation for eligible construction classification codes for the purposes of determining workers compensation insurance premiums. On June 30, 1998, the New York State Legislature enacted the Construction Employment Payroll Limitation Law (Chapter 135 of the Laws of 1998) to provide a more equitable distribution of workers compensation premium between high-wage paying and low-wage paying employers in the construction industry. The law exempts employments engaged in the construction of one- or two-family residential housing. The law also creates three geographic rating territories used in calculating premiums. How will the Construction Payroll Limitation Law affect you? The new law potentially affects any policyholder endorsed with construction classifications. The program affects premium in two ways, as it provides for: 1. A weekly payroll maximum for each construction worker. 2. A surcharge based on the location of the job site. 1
Who is not affected by the law? The Payroll Limitation Law does not apply to construction companies engaged exclusively in the construction of one or two-family houses. However, documentation must be provided (contracts, invoices, etc.) verifying the type of work performed. Premiums for these companies will be determined based on the traditional methods (total payroll, without territorial surcharges). Companies involved in both residential (one- or two-family homes) and non-residential work are subject to the law for their non-residential operations. What qualifies as construction work under the Payroll Limitation Law? New construction, renovation, repair, remodeling, maintenance of existing structures and commercial construction are all eligible for treatment under the law. Are all types of residential construction exempt? No. Only construction work on one- or two- family detached or semidetached (no more than two attached units) houses is exempt. Any construction work on apartment houses, co-operatives, three-family-ormore residences, mixed-use one- and two-family dwellings, farms and attached (three or more units in a group of connected houses) townhouses or brownstones is subject to the payroll limitation law, regardless of whether the work is done for an individual owner, a renter, the building owner, or the building manager. Are chargeable subcontractors and casual labor subject to the Payroll Limitation Law? Yes. Territorial differentials are applied to casual labor and uninsured subcontractors at job sites that are not one- or two-family houses. Is the law just for construction companies? No. The law applies to any company with workers in any of the eligible classifications. 2
How does the payroll limitation work? A payroll cap is applied to the actual weekly payroll, per employee, in each of the eligible construction classification codes. Actual payroll, and not the limited payroll, is used for employments engaged in the construction of one- or two-family residential housing. Which classifications are eligible for the limitation and surcharge? 0042 5069 5223 5479 5610 6216 6319 9534 3365 5102 5348 5480 5648 6217 6325 9539 3724 5160 5402 5491 5651 6229 6400 9545 3726 3737 5183 5184 5403 5428 5506 5507 5701 5703 6233 6235 6233 6701 6701 7536 9549 9549 9553 5000 3737 5188 5184 5429 5428 5508 5507 5709 6251 6235 7536 7538 9553 5022 5000 5190 5188 5443 5429 5536 5508 6003 6252 6251 7538 7601 5037 5022 5193 5190 5445 5443 5538 5536 6005 6254 6252 7601 7855 5040 5037 5213 5193 5462 5445 5545 5538 6017 6259 6254 7855 8227 5057 5040 5221 5213 5473 5462 5547 5545 6018 6260 6259 8227 9526 5059 5057 5222 5221 5474 5473 5606 5547 6045 6306 6260 9526 9527 5059 5222 5474 5606 6204 6306 9527 Maximum chargeable payrolls Weekly payroll cap amounts and effective dates are as follows: Effective Date Weekly Payroll Cap 10/1/2000 $900 per week per employee 10/1/2001 $800 per week per employee 10/1/2002 $750 per week per employee 7/1/2008 $825 per week per employee 7/1/2009 $900 per week per employee Thereafter New York State average weekly wage 3
What are the requirements for record keeping? DETAILED BOOKKEEPING IS IMPORTANT UNDER THE NEW LAW. Weekly payroll records must be kept showing each employee s earnings separately. Each employee s payroll must be separated by: Classification (type of work performed) Hours worked Regular pay Overtime pay Gross pay Residential work pay (one or two-family homes) Commercial work pay (non-residential) Geographic location (applicable territories for non-residential work) Any holiday, sick, vacation and bonus pay must be shown separately. IMPORTANT: DOCUMENTATION SUCH AS CONTRACTS, INVOIC- ES AND DAILY WORK REPORTS MUST BE PROVIDED AS VERIFI- CATION FOR YOUR PAYROLL SEPARATION. What if I don t supply proper records? If weekly payrolls are not separated for each construction worker the limitation will not be applied. A worker would be included at his total salary even when earning over the payroll cap. If payrolls are not separated by territory then all payroll will be allocated to the region with the next highest surcharge to that of the home office. If the review of any record indicates that any work was done in the highest rated territory, then all payroll would be assigned to that territory. If work done on one- or two-family homes is not separated, all payroll will be considered commercial with territorial differentials applied; however, the limitation will not be applied. 4
Special record-keeping rules Rules for special record-keeping situations most-likely to arise: Vacation, holiday and sick pay belong in the territory of the employer s home office. Bonuses are spread across the entire policy period. Deduct payrolls for one- or two-family residences before calculating the limitation. Deduct premium overtime and wrap-up job payrolls before calculating the limitation. Officers in construction codes will be assigned the lower of the payroll limitation maximum or the traditional officer maximum. Only one form of maximum will be applied during the policy period. Sole proprietors and partners in construction codes who request coverage are charged at the statutory minimum payroll. The entire salary of a construction employee working in more than one territory in a week belongs in the territory where he spent the majority of his time. In computing the limitation for a worker in more than one classification in one week, the payrolls will be split in the same ratio as the gross payroll was split. For example, a concrete worker involved in both heavy (Code 5213) and light (Code 5221) concrete work was paid $1,000 for #5213 work and $500 for #5221 work in one week. The total payroll was paid in a 2:1 ratio. Therefore, the limited payroll will be split in the same ratio. A regular NY employee working on temporary assignment in another state receives the territory of the employer s home office. A construction employee subject to the U.S. Longshore & Harbor Workers Act belongs in the territory immediately adjoining the waters where the work was performed. Drivers are subject to the new law only if the construction code includes drivers. Where the yard classification (8227) has been endorsed, the territory of the yard location applies. 5
The three New York territories Territory 1 includes the Bronx, Kings, New York, Queens and Richmond. Territory 2 includes the counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester. Territory 3 includes all other counties within the state. 3 2 1 2 Is the surcharge different for each territory? Yes. As premiums must be sufficient to cover claims in the construction industry, differentials are applied to offset premiums lost to the limitation in each region. The differentials are adjusted annually. For new policyholders, the policy will apply the surcharge of your home territory unless you provide documentation of work in a different territory. 6
Sample Payroll Limitation Schedule (The $825 limited payroll is effective as of 7/1/08. Please see Page 3 for subsequent limited payrolls.) Pay Hrs. Reg. Pay OT Pay Gross OT Adj. 1-2 Family Terr.#3 Terr.#2 Terr.#3 Terr.#2 Date at 1-1/2 Payroll Premium Gross Homes Code 5183 Code 5183 Code 5183 Code 5183 Before Before With With Limitation Limitation Limitation Limitation 8/1/08 40 $900 $0 $900 $0 $900 $900 $825 8/8 50 $900 $300 $1,200 $100 $1,100 $400 $700 $700 8/15 50 $900 $300 $1,200 $100 $1,100 $1,100 $825 8/22 50 $900 $300 $1,200 $100 $1,100 $850 $250 $825* $0 *In the week of 8/22 the employee worked in both Territory 2 and Territory 3. Since the majority of the employee s time was spent in Territory 3, the entire limited payroll takes Territory 3. 7
More special situations If only annual payroll is available for an employee, can the annual payroll be divided by 52 weeks to arrive at a weekly payroll? No, only the actual weekly payroll can be used. The Payroll Limitation Law specifically states that the payroll limitation applies to an employee s actual weekly payroll. How does the payroll limitation apply to an employee who earns $1,800 bi-weekly? The law does not allow for averaging of payrolls. However, if an employee is paid other than on a weekly basis, the employee s payroll amount is divided by the number of weeks that apply to a paycheck, and is subject to the maximum chargeable weekly payroll cap. If an employee didn t work a full week, how is payroll limitation applied? A partial week is considered a full week in determining an employee s weekly pay for payroll limitation purposes. Is a covered sole proprietor or partner s weekly draw subject to the limitation? No. The weekly draw is not subject to payroll limitation and the minimum remuneration for sole proprietors and partners applies. If an employee s payroll is below the payroll limitation maximum amount, does the territory premium differential still apply? Yes. The territory premium differential applies whether or not a limited payroll amount applies. Separate weekly payroll records, by employee, must be maintained to determine the appropriate differential. Territory premium differentials do not apply to the construction of one- or twofamily residential housing. Is the territory premium differential subject to experience rating? Yes. The territory premium differential is applied prior to the experience rating. Does the New York Construction Classification Premium Adjustment Program (PAP) still apply? Yes. As of 4/1/01, the PAP credit is based on limitation payrolls. 8
For more information If you have any questions regarding Payroll Limitation, of if you need assistance in preparing your payroll records, our premium audit staff is ready to help at the following phone numbers. Of course, our field audit staff is always ready to assist you during your audit. Albany 518-437-8982 Binghamton 607-741-5055 Buffalo 716-851-9147 Bronx, Queens 212-587-7390 Brooklyn, Staten Island 212-587-7390 Lower Manhattan 212-587-7390 Upper Manhattan 212-587-7390 Nassau 631-756-4219 Rochester 585-258-2070 Suffolk 631-756-4436/4437 Syracuse 315-453-6500 White Plains 914-253-4866/4865
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