Payroll is one of the principal factors in determining an employer’s Workers’ Compensation premium. Premium audits are conducted at the end of the annual policy to determine if the employer paid the appropriate amount for Workers’ Compensation insurance. The final premium audit is based on actual payroll, operations, and job classifications for the expired coverage period. If payroll does not include all payments as required and is underreported, penalties and fines may apply once a premium audit is completed. As a result, it’s important to understand what payroll includes.
Many employers hire employees who are required to travel for work. These employees are often paid an hourly rate of pay or salary, plus a per diem to cover the costs incurred for travel expenses. Payroll may include the per diem payment or the value of lodging, meals and travel expenses paid by the employer to their employees. As such, the per diem payment by an employer to its employees is included in the calculation of payroll in most states.
Furthermore, when employees who receive per diems are injured, these payments may be included to determine the employees’ average weekly wage, thereby increasing the cost of potential lost time benefits. Depending on the state, employers may be required to document and report per diem payments when completing wage statements for their workers’ compensation claims. For example, North Carolina’s Form 22, Statement of Days Worked and Earnings of Injured Employee, includes a data field in which the employer is specifically asked to enumerate per diem payments.
Although not all state forms specifically request that per diem payments be listed in the wage statement, if an employer regularly pays an employee a per diem stipend, it is best practice to include an employee’s per diems when completing the wage statement for a workers’ compensation claim. Doing so will allow the claims specialist to fully analysis and calculate the employee’s average weekly wage early in the claim process and will reduce the risk of underpayment penalties.
Return-to-Work Program and a Culture of Safety
For traveling employees with a per diem, it’s also prudent and cost effective to create and nurture a strong safety culture supported by a robust Return-to-Work program to help get an injured employee back to work as soon as possible in order to mitigate an employer’s overall exposure. Prescient National provides risk-management services to organizations to help establish a strong safety culture. Our consultation services are free to each policyholder and tailored to the organization’s unique needs.
