State Fund Classification Tips: Which Factors to Note

Understanding the following key points can help you prepare for an audit if your business involves these classifications:

Construction

• There are many types of classifications within this industry.
• Each classification is defined by a specific kind of work and/or wage level.
• Be aware of differences among classifications (for example, carpentry, wallboard application, roofing, and so forth) that are defined as separate functions.
• Be aware of thresholds for “dual-wage” classifications (higher-wage employees qualify for a lower-rated class).
• To allocate payroll among the classifications, you must clearly document employees’ work with time cards and other sources that verify jobs, hours, and wages.
• If required documentation is not available, all payroll may be assessed at the highest applicable rate for your policy.
• (Read this article for important information on Dual Classifications)

 

Clerical (class 8810)

• Employees in this class must have no exposure to the business operative hazard (that is, no handling of products or industrial equipment).
• Their time must be spent exclusively on clerical duties.
• Their work area must be physically separate from all nonclerical work space.
• Their payroll may not be divided between Clerical and any other classification.

Outside Sales (class 8742)

• Employees in this class must do work that is specifically outside-sales work.
• They must be physically separated from the business operative hazard.
• They must spend their workdays in sales or collection work and/or in on-premises clerical work.
• Their payroll may not be divided between Outside Sales and any other classification.

Corporate Officers

• “Corporate Officers” includes partners and LLC managers and members.
• Their payroll should be assigned to the classification that best describes their job duties.
• Their payroll cannot be placed in the Clerical or Outside Sales classes unless their duties meet the qualifications described in those classes.
• If officers directly supervise any employee, the payroll of officers is assigned to the classification supervised.
• Their payroll is subject to a maximum and minimum payroll amount.* The audit makes adjustments as needed if the actual payroll is above or below the current thresholds shown on the back of the payroll report.
• If they are excluded from coverage by endorsement, they are excluded from premium assessment for their payroll; there is no need to report their payroll.

* The officer maximum is $84,500 for the 2005 policy year and $87,100 for 2006; the minimum is $31,200 for the 2005 policy year and $32,500 for 2006.