August 2020: This article is the third in our series on types of remuneration (payments and goods given to workers) and how they affect the premium on your workers' compensation policy.
Imagine that you are meeting with the auditor for your workers’ compensation policy.
You say: “I’ve given you all of my pay records. I gave you my subcontractor information too. That should do it, right?”
Auditor: “Nope, sorry! We need to ask about some other remuneration that isn’t money.”
You: “Um… what?”
In this series, we’ve shown that remuneration is what you give workers in exchange for their labor. Last time, we discussed the actual money you pay your workers. But there are some things you may give your employees besides money. You may think that they don’t affect your policy’s premium. But some of them do.
Why is some non-monetary remuneration included in my premium calculation?
Employers may give items to their workers as a substitute for money. Items that have a real value, and are provided as replacements for wages, are included in remuneration. Here are some of the more common types of non-monetary remuneration:
So, what are examples of remuneration that are substitutes for money?
Meals:
Let's say that your employer provides lunch to you every day, that could be considered to be remuneration and it could be included.
If you are working late and your employer provides you dinner or a meal reimbursement, that would not be included as remuneration.
Rental Value of Housing:
Let’s say that you own an apartment complex, and you have an amazing maintenance guy named Joe. For whatever reason, Joe loses his home, and it looks like he may have to move away. You know you won’t be able to replace Joe, so you come up with a solution: You could just let Joe stay in one of your apartments! This may work well for you and for Joe, but the value of the apartment is non-monetary remuneration.
This example may seem far out. But there may be other reasons you provide housing—so keep up with the rental value of any property you use to house employee(s). You’ll need to include it in your premium calculation.
Store Certificates or Merchandise in Lieu of Pay:
Let’s say that your employee Maria has a deadline to meet. Maria doesn’t tell you, but she works over the weekend because she really wants to finish her work. You tell Maria, “I really appreciate what you did. I don’t have the extra money in the payroll budget, so I’ll give you this $100 gift card for Bed Bath and Beyond.” Is that included in your premium calculation? Yes, it is. Make sure you keep up with the value of the item in your payroll register, so that you report it on your audit as the law requires.
For your information: employee discounts on goods that the employer sells are NOT included.
Summary:
This article covered a few examples of things you may give to employees instead of money. Remember to keep good records, so that you don’t get surprised at audit-time. Feel free to call us for more information. Look for our final article in this series next time: what is excluded from your premium calculation.