What is gross payroll?

Gross payroll is the payroll paid to your workers before any deductions. This includes any benefit plans such as 401(k) and cafeteria-style plans. Gross payroll includes cash payments. Gross payroll may be designated as wages, salary, bonuses, commissions, or profit sharing or substitutes for money. Some substitutes for money may be goods, board and lodging, working out a debt, etc., for which the reasonable cash value of the non-cash payments would be considered wages.

Payments may be paid on an hourly, daily, weekly, monthly, yearly, or other frequency. Gross payment may be earned on a job-by-job basis, commission basis, piecework, or straight salary.

All wages paid are to be included in the payroll report and audit. Start with gross payroll and subtract those wages as indicated as excluded to arrive at the subject payroll to be reported.

Current National Council on Compensation Insurance (NCCI) rules describe what is to be included and excluded as remuneration:

Inclusions

a. Wages or salaries including retroactive wages or salaries;

b. Total cash received by employees for commissions and draws against commissions;

c. Bonuses including stock bonus plans;

d. Extra pay for overtime work (reportable at straight time wage);

e. Pay for holidays, vacations, or periods of sickness;

f. Payment by an employer of amounts otherwise required by law to be paid by employees to statutory insurance or pension plans, such as the Federal Social Security Act;

g. Payment to employees on any basis other than time worked, such as piecework, profit sharing, or incentive plans;

h. Payment or allowance for hand tools or power tools used by hand provided by employees either directly or through a third party and used in their work or operations for the insured;

i. The rental value of an apartment or a house provided for an employee based on comparable accommodations;

j. The value of lodging, other than an apartment or house, received by employees as part of their pay, to the extent shown in the insured’s records;

k. The value of meals received by employees as part of their pay to the extent shown in the insured’s records;

l. The value of store certificates, merchandise, credits or any other substitute for money received by employees as part of their pay (refer to Exclusions below for certain fringe benefits [substitutes for money] not considered to be remuneration);

m. Payments for salary reduction, employee savings plans, retirement, or cafeteria plans (IRC 125) that are made through employee-authorized salary reduction from the employee’s gross pay;

n. Davis-Bacon wages or wages from a similar prevailing wage law;

o. Annuity plans;

p. Expense reimbursements to employees to the extent that an employer’s records do not substantiate that the expense was incurred as a valid business expense;

Note: When it can be verified that the employee was away from home overnight on the business of the employer, but the employer did not maintain verifiable receipts for incurred expenses, a reasonable expense allowance, limited to a maximum of $30 for each such day, will be permitted.

q. Payment for filming of commercials excluding subsequent residuals that are earned by the commercial’s participant(s) each time the commercial appears in print or is broadcast.

Exclusions

a. Tips and other gratuities received by employees;

b. Payments by an employer:

(1) to group insurance or group pension plans for employees, other than payments covered by Inclusions f and m;
(2) into third-party pension trusts for the Davis-Bacon Act or a similar prevailing wage law, provided the pension trust is qualified under IRC Sections 401(a) and 501(a);

c. The value of special rewards for individual invention or discovery;

d. Dismissal or severance payments except for time worked or accrued vacation;

e. Payments for active military duty;

f. Employee discounts on goods purchased from the employee’s employer;

g. Expense reimbursements to employees to the extent that an employer’s records substantiate that the expense was incurred as a valid business expense;

Note: Reimbursed expenses and flat expense allowances, except for hand or power tools, paid to employees may be excluded from the audit, provided that all three of the following conditions are met:

(1) The reimbursed expenses or expenses for which allowances were paid were incurred upon the business of the employer, and
(2) the amount of each employee’s expense payments or allowances is shown separately in the records of the employer, and
(3) the amount of each expense reimbursement or allowance payment approximates the actual expenses incurred by the employee in the conduct of his or her work.

h. Supper money for late work;

i. Work uniform allowances;

j. Sick pay paid to an employee by a third party such as an insured’s group insurance carrier that is paying disability income benefits to a disabled employee;

k. Employer-provided perquisites (perks) such as:

(1) Use of an automobile;
(2) An airplane flight;
(3) An incentive vacation (e.g., contest winner);
(4) A discount on property or services;
(5) Club memberships;
(6) Tickets to entertainment events.

l. Employer contributions to salary reduction, employee savings plans, retirement, or cafeteria plans (IRC-125) - Contributions made by the employer, at the employer’s expense, that are determined by the amount contributed by the employee.

About NCCI, rating organizations

NCCI is Idaho’s rating organization. Idaho’s law requires all companies offering workers compensation insurance to be a member of a rating organization. A rating organization provides basic manual rates, rules, and classifications that all carriers must use. A rating organization determines rates on an actuarial basis by comparing payroll/premium to losses in each classification, then factoring in the carriers’ expenses and profit.

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Idaho State Insurance Fund