Unit VIII Scholarly Activity
Columbia Southern University
Standard Exception classifications:
“Certain classes of employees in workers compensation insurance who are common to many types of business and are separately rated unless included specifically in the wording of the governing occupational classification. Some of these exceptions include clerical employees, drivers, and salespersons.” (irmi.com)
The standard exception classifications have different class codes to help separate out those who do the following type of work: clerical employees – class code 8810, clerical telecommuter – class code 8871, drafting employees – class code 8742, salespersons – class code 8742, and drivers – class code 7380 (insurancejournal.com).
These employees normally hold the lowest risk of injury in companies and can often lower insurance cost for bigger companies. If all employees were lumped into one category the premium cost could greatly enhance for a company financially.
Interchange of Labor rules:
There are benefits to splitting up pay roll in different classification codes. The division of employee’s payroll will actually reduce the Workers Comp premium before the policy renewal (cutcompcost.com).
A business to help cut down cost is to use the split payroll method; which some states do not allow. You can have an employee work a low risk job part of a day or partial week. The same employee would work a higher risk job the rest of the time for the week. With the lower risk job taking up some of the employee’s workweek, it can help reduce the cost of insurance for these types of employees.
General Exclusion Classes:
Many larger companies will use labor codes for different employees based on the type of jobs they are doing. These labor codes and rates are essential when it comes to workers compensation costs. Not having these labor classes could cost bigger companies millions more in insurance rates if every employee was lumped together at one rate.
"General exclusion classes are listed separately on the workers' compensation policy and a separate rate (based on the class code) is charged for the employees within these classes of operations.” (mynewmarkets.com)
Use of the Multiple Enterprise rule:
“The single enterprise rule introduced in the previous article requires that all activities usual and customary to a particular operation be assigned to one "governing" class code” (mynewmarkets.com)
With the use of the multiple enterprise rule larger companies can keep their cost down with for lower risked jobs. If the company has 2,000 office employees over the 6,000 manufacturing employees. Their insurance rates could be lower for the office employees over the industrial workers with higher risked jobs. Not having the multiple enterprise rule could be detrimental to some companies financially.
The multiple enterprise segment would cost the company time to manage and organize the time for each employee. This cost would be save more with lower insurance premiums when dealing with thousands of employees and this could save a company hundreds of thousands of dollars by being able utilize this rule.
IRMI (2020). Standard Exceptions. Retrieved from: https://www.irmi.com/term/insurance-definitions/standard-exceptions
Insurance Journal (2020). Audit Rules and Guidelines – Pat II. Retrieved from: https://www.insurancejournal.com/blogs/2015/04/13/360865.htm
My New Markets; Powered by Insurance Journal. Workers’ Compensation Audit Conclusion. Retrieved from: https://www.mynewmarkets.com/articles/93835/workers-compensation-audit-conclusion
J&L Risk Management Consultants (2008). Interchange of Labor Rule for Workers Comp Payroll. Retrieved from: https://cutcompcosts.com/2008/10/interchange-of-labor-rule.html