Misclassification |
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In the example below, a discrepancy related to whether salespeople working for a roofing company should be classified as roofers could cost the roofing company $431,000 in workers' compensation premium - per year! |
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January 1, 2008 |
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You are a roofing contractor in the state of Florida with $8,000,000 in payroll. 1/4 of your payroll is for your salespeople, the remaining payroll is for your roofers. |
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Your premium should be calculated as follows: |
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Class Code |
Description |
Payroll |
Rate |
Manual Premium |
|
8742 |
SALESPERSONS OR COLLECTORS—OUTSIDE |
2,000,000 |
0.64 |
12,800 |
|
5510 |
ROOFING—ALL KINDS & DRIVERS |
6,000,000 |
22.19 |
1,331,400 |
|
|
|
|
|
|
|
|
Total |
8,000,000 |
|
1,344,200 |
|
You work out a payment plan with your insurance company to pay $1,344,200 workers' compensation premium during the year. |
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July 1, 2009 |
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Upon performing an audit of your company, your insurance company decides that all of your employees are roofers. |
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They calculate your premium as follows: |
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Class Code |
|
Description |
Payroll |
Rate |
Manual Premium |
8742 |
|
SALESPERSONS OR COLLECTORS—OUTSIDE |
- |
0.64 |
- |
5510 |
|
ROOFING—ALL KINDS & DRIVERS |
8,000,000 |
22.19 |
1,775,200 |
|
|
|
|
|
|
|
|
Total |
8,000,000 |
|
1,775,200 |
|
|
|
|
|
|
|
|
|
Premium Difference |
431,000 |
|
August 1, 2009 |
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Your insurance company sends you
a bill for the premium difference - $431,000. |
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Notes: |
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The example above was simplified to demonstrarte the effect of misclassification, and does not include the effects of experience rating, premium discounts, or any other rating program generating premium credits or debits. Please contact Bill Hager at 561-995-7429 or info@comppremiumwizards.com for more information. |
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