Focus in on Idle Time

With expense reduction being top of mind for many organizations, the NCCI (National Council on Compensation Insurance) approved a payroll exclusion that could directly impact workers compensation cost. The COVID-19 pandemic has created challenges with regards to workers compensation, and the NCCI officially addressed a new payroll exclusion on 4/26/2020.

What does this mean?

A revision to the NCCI Manual has been approved to exclude payments to paid furloughed employees. Yes, EXCLUDED payroll! Fresh out of college, I was a premium auditor and experienced that payroll exclusions are a big deal to leadership teams. Idle time is an exclusion and will now be in the same category as severance pay, premium overtime, tips/gratuities, employer provided perks – you get my drift if you have ever been lucky enough to experience a premium audit. This is great news for employers! Idle time will now be excluded from premium calculations. This will directly impact your workers compensation cost. 

What actions should you take?

Begin tracking now! Do NOT wait until your policy expires and you get that call from your insurance carrier stating it is time to complete your premium audit. Statistical code 0012 has been introduced to capture idle time payroll and it is expected that this exposure will shift to this code. But for now, begin tracking it. This can be done many ways and I would recommend consulting with your Risk Management Advisor to proactively establish a process. 

How can you prepare for the audit?

I think this starts with a 3-step process. 

Prepare: Begin preparing for the audit throughout your policy period. Changes occur throughout the year within your organization, such as new employees, employees shifting duties, and in 2020 – new payroll exclusions. It is never too early to start preparing!

Package: The premium auditor will (or should) request certain documents, such as your payroll ledger, certificates of insurance, reports for payroll by employee, to name a few. Your preparation will make this process easy. A summary of audited exposure by code is something I highly recommend! 

Present: Not too much to explain here, other than from prior experience, premium auditors love to be presented with all documents they requested….the first time! A little training from your Risk Management Advisor in “presenting” can go a long way! You have now gotten off on the right foot with your premium auditor.

To summarize, trying to understand the premium audit process can be challenging and stressful for leadership teams. What is the level of confidence that you are NOT being overcharged on your premium audit, for items like idle pay? It is pretty common for premium audits to be incorrect. As a trusted advisor, I think it is important to go deeper with my clients so that they better understand the premium audit process. It can be costly, so get the advisement you deserve and get it right!