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May 13, 2020

NCCI rule excludes payroll to furloughed workers from workers' comp premiums

As employers continue to navigate a constantly evolving business environment in the midst of COVID-19, we want to make certain you are aware of a new NCCI rule related to workers’ compensation premium calculation.

Previous Rule. Previous to the National Council of Compensation Insurance (NCCI) recent rule, businesses that have suspended operations due to COVID-19, but continue to pay employees who are at home but not working, had to include that payroll paid to these employees in calculations of their workers’ compensation premium.

New Rule Change. The NCCI passed a rule that basically takes the payroll for that period of time when the worker is furloughed and removes it from the calculation.

The new rule will stipulate that payroll for furloughed workers (workers that continue to be paid even though they are not working) will not be used in the calculation of Workers’ Compensation premium at the time of audit. Essentially, this is rewarding employers who paused or limited their operations as a result of COVID-19 and the various state shelter-In-place orders, but continued to keep inactive employees on the payroll. These employers will not be charged Workers’ Compensation for the payrolls that fall into this category. 

NOTE: The definition of Paid Furloughed Employees in the filing DOES NOT extend to employees on leave under Federal leave programs such as FFCRA, EPSLA and EFMLEA.

What Should Employers Do? It is essential that employers that have furloughed employee payroll, track that payroll for the period of inactivity or reduced operations. Employee Class Code 0012 should be used to track this payroll. Employers should keep clear records regarding this payroll in order to report it at the time their Workers’ Compensation policy audit following policy expiration.

If you have specific questions about the rule change, please reach out to your Marsh & McLennan Agency representative.  Visit the NCCI website for more information and access to Frequently Asked Questions and Answers.

Note: The NCCI oversees Workers’ Compensation Rates and Rules in 36 member states.  There are also 11 independent states that formulate their own rules and rates with respects to Workers’ Compensation. 

NCCI has proposed this change, and many independent states have either proposed or ratified similar changes.  It is expected that most if not all states will adopt this change.