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Why would I exclude overtime premiums from my workers compensation calculations?

Some insurance companies base their insurance premium calculations on your employees' base wages. This means that they don't charge you extra when an employee works overtime.

Example

Let's say your employee Dan Miller earns $20 an hour straight time and $30 an hour overtime (or time-and-a-half). Say the workers compensation insurance rate for Dan's workers compensation code is 5.50 per $100 (or 0.055). And let's say that last week, Dan worked 40 hours straight time and 10 hours overtime. His gross wages, then, were (40 x $20) + (10 x $30) = $800 + $300 = $1100.

  • If your insurance company does not exclude overtime premiums from its calculations, then you would owe 0.055 x $1100 in workers compensation insurance, or $60.50.

  • If your insurance company does exclude overtime premiums, then you owe less. Your insurance company charges you as if Dan had worked all 50 hours at straight time. So you would owe only $55.00, or 0.055 x $1000, where $1000 = (40 + 10) x $20 (the straight-time wage).

If you are not sure what your insurance company's policy is, either check with them or your accountant.

See also

KB ID# H_PAY_WC_WHY_EXCLUDE
10/1/2016 12:00:19 AM
PPRDQSSWS400 9138 Pro 2017 36c744