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Workers' Compensation Insurance

April 8th, 2011

Remuneration vs. Payroll

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Martin Summers

Insurance Agent

Remuneration is the premium base used to calculate workers’ compensation premiums. It is generally referred to as payroll, but it includes more than the employees’ weekly paychecks. Remuneration is defined to mean money and substitutes for money and it includes the following:

  • Wages or salaries, including retroactive wages and salaries
  • Total cash received by employees for commissions, draws against commisssions, piecework, profit sharing, and incentive plans
  • Bonuses, including stock bonus plans
  • Pay for holidays, vacations, and sick leave
  • Employees’ share of Social Security and similar statuatory plans even if paid by the employer

Remuneration excludes some pay received by employees and the following can be deducted from the total remuneration:

  • Overtime – the extra amount of pay above the regular wages may be excluded for overtime hours that are worked by employees.
  • Tips
  • Payments by employees for group insurance or pension plans
  • Special awards for invention or discovery
  • Severance Pay
  • Executive officers have a minimum and maximum limits for their payroll if they are included on the policy
  • Partners and Sole Proprietors have a fixed amount of payroll if they are included on the policy

When using remuneration to compute the manual premium on a workers’ compensation policy, you must use it in $100 units. Basically, just divide the total remuneration for each classification code by 100 before multiplying it by the class code’s corresponding rate.

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