First and foremost, if you are in the state of California and have employees, then you have to have workers compensation insurance.
If you are a licensed contractor in the state of California, the CSLB (Contractor’s State License Board) will also require that you have workers compensation (you are exempt if you have no employees).
What is a Dual Wage Class Code?
Dual wage class codes are codes where there is a different rate charged depending on the hourly pay rate for that class code. As an example, the Concrete code of 5202 is used where the employee is paid over $24.00 per hour and the 5201 code is used where the employee is paid under $24.00 per hour. The rate for the lower hourly wage code is much higher than the rate for the higher wage code resulting in a very different charge for premium. There are a number of dual wage codes like this including carpentry and others.
The Workers Compensation Insurance Rating Bureau (WCIRB) requires that you must clock each employee onto and off each job during a work day and if the employee does more than one type of job during a work day, they must be clocked on and off each different job during that day. This way the exact payroll is recorded for each class code and the proper premium will be charged.
If you don’t use this type of time clocking system and you can’t provide this level of detail during an audit (time cards, personnel records, and employee earnings records), the insurance carrier is required to move all payroll for that employee into the higher rated code. This can cost you thousands of dollars of additional premium so it’s vital that you understand and employ the proper type of time recording system. Original time cards must clearly show start, stop and break times, hours worked, job duties and wage rates.
If you don’t already have such a system there are a number of hardware and software based products on the market that you can use and you can find many of these just by doing a Google search on “time card systems for contractors”.
What about Sub-Contractors?
One other vital area to pay attention to is the use of sub-contractors. The WCIRB requires that you get proof of each sub-contractor’s valid license and proof that they have their own workers compensation coverage. If you can’t provide this evidence during an audit, the auditor can add all of the money that you paid to the sub-contractor to your payroll totals and charge you for additional premium based on the type of work the sub-contractor did on the project. So again, it’s vital that you understand what’s required and make sure you follow those requirements.
If you ever have questions or want more information, please don’t hesitate to contact our office. We’re always happy to help!