Managing L & I Premiums - Record Keeping Keeps the Ball in your Court
It is essential that contractors and subcontractors keep proper hourly records of their employees.
If they do not, then Washington State Department of Labor of Industries (L&I) will use a methodology and estimation called an “Average Hourly Wage Determination” which will almost always result in excessive workers' compensation premiums for construction industry firms.
To prevent an unfair Notice and Order of Assessment, construction contractors and subcontractors must maintain adequate records in case of Labor & Industries audit.
L & I determines the amount of workers' compensation taxes owed by “Units of Exposure.” WAC 296-17-31021 For almost all construction businesses, for instance electricians, framers, flooring, landscapers, HVAC, “Units of Exposure” are the actual hours worked by employee.
There are some exceptions, for instance drywall installation, in which “Units of Exposure” are based on the material installed/finished rather than hours worked.
Even if construction employers pay their workers by salary, by piecework, or commission, industrial insurance premiums are solely determined by “Units of Exposure.”
Therefore, employers must keep records for L & I premiums so that the “Units of Exposure” can be easily calculated and assessed. In most cases, that is simply keeping track of the actual hours worked by each employee—regardless of how they are paid, or, even indeed if the employer does not care about the actual hours worked.
Labor of Industries states at WAC 296-17-35201 the actual records that employer must keep for each worker to prevent L & I from using its own estimation procedures and assessing penalties to the employer.
L & I requires the following records be kept for three years (a) The name of each worker; (b) The Social Security number of each worker; (c) The beginning date of employment for each worker and, if applicable, the separation date of employment of each such worker; (d) The basis upon which wages are paid to each worker; (e) The number of units earned or produced for each worker paid on a piecework basis; (f) The risk classification applicable to each worker whenever the worker hours of any one employee are being divided between two or more classifications; (g) The number of actual hours worked (WAC 296-17-31002) by each worker, unless another basis of computing hours worked is prescribed in WAC 296-17-31021 or 296-17-935; (h) A summary time record for each worker showing the calendar day or days of the week work was performed and the actual number of hours worked each work day; (i) The workers' total gross pay period earnings; (j) The specific sums withheld from the earnings of each worker, and the purpose of each sum withheld;(k) The net pay earned by each such worker.
Contact us now and we can assist you in ensuring your record keeping is compliance with WAC 296-17-35201.
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