[YWH S1E14] The Only Thing that Doesn't Change is Change. Workers' Comp in 2020
Holiday decorations up, check. Holiday travel booked, check. Year-end needs at work done, check. Review 2020 changes to workers’ compensation, WHAT? There are so many details to attend to in preparation for the new year. Combine that with holiday festivities, travel, and last-minute shopping, you’re bound to gloss over some key items that can affect your business in 2020, both positively and negatively. One of those is workers’ compensation changes in California. There will be payroll caps for specific class codes, which is new to California, saving some employers a chunk of change. There will also be changes to dual wage thresholds, an addition of a new class code and removal of older class codes.
Math was never my favorite subject in school, but I sure loved Statistics. Statistics are raw, in your face data, that just doesn’t care what you think, kind of like a dog that drops a bomb in the middle of your backyard dinner party then walks away like nothing happened. In workers’ compensation insurance, statistics have shown that highly compensated employees are less costly and as such many states have salary caps limiting the amount of premium that an employer pays for an employee in a particular class code. Well hold on to your lederhosen, California has finally joined the party, employers with highly compensated Executives, as well as employees in Entertainment, Real Estate, Legal and Programming will save money in annual premium costs in 2020.
Dual wage class codes were created in an attempt to level the playing field in construction. When workers began to unionize, employers with union employees were getting outbid because their cost of labor was higher due to the higher union wages and subsequent higher workers’ compensation premiums, as the premiums were based on gross reported payroll. The dual wage sets a breakpoint dollar amount per hour such that employees paid below the dollar amount have a higher premium cost and employees paid above the dollar amount have a lower premium cost. Statistics further support this as they show higher wage earners cost less over the long run, typically due to their years of experience and expertise as they advance through their respective trade. Fourteen class codes have an increased threshold in 2020, so be sure to review your wages and estimated cost of premiums as you may need to make adjustments to your employee’s earnings and/or may need to adjust your bids to accommodate the additional costs.
Imagine what scientists must have gone through trying to classify the platypus, is it a waterfowl, is it a mammal, is it an alien from another planet? There are thousands of individual jobs in California and only 550 class codes in which to identify them for workers’ compensation purposes. Some class codes describe the duties of a job spot on, while others seem to be a stretch of the imagination. Statistics can help identify and warrant the creation of a new class code, as in the case of 8010, Stores – hardware, electrical or plumbing supplies, which is new for 2020. This code was created to classify Home Depot type stores and actually carries a lower premium, primarily due to the shift to corporate big-box retailers that tend to have a stronger focus on safety, so be sure to make the proper adjustments to your codes if you are in this industry. Conversely, jobs tend to shift out of mainstream society as we advance in technology and adapt to the market. Fur trader, potash distributor and wagon maker have fallen out of mainstream American since their heyday in the 1800s. As our market evolves, the need to remove class codes becomes necessary and those still in the trade move under a broader class code. Seven class codes have been eliminated in 2020 so be sure to double-check the list and adjust accordingly before you process your first payroll in 2020.
Year-end can be hectic and we all have a laundry list of items to check off before the new year. Be sure to add workers’ compensation review to that list as some changes can save you money in 2020, and who doesn’t want to save money? Here’s to a prosperous 2020 to you all!!
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