The Construction Employment Pa yroll Limitation Program

Eligible Classifications

Chargeable Payrolls

Recordkeeping Requirements

Territories & Surcharges

Special Situations

NEW YORK STATE INSURANCE FUND

The ConstructionEmployment PayrollLimitation Program

THE NEW YORK STATE INSURANCE FUNDWorkers’ Compensation and Disability Benefits Specialist since 1914

Then...Now...Always TM

nysif.com

payroll limitation171010_payroll limitation060630 10/10/17 10:44 AM Page ii

Contents1• What is the Construction Employment PayrollLimitation Law?

• What are the effects of the law?

2• Who and what qualifies under the law?

3• How does the limitation work?• Eligible classifications• Chargeable Payrolls

4• Recordkeeping requirements

5• Special recordkeeping situations and rules

6• New York territories and surcharges

7• Sample recordkeeping for payroll separation

8

More special situations:• Annual payroll, bi-weekly payroll and partialweek payroll

• Sole proprietor’s weekly draw• When the limited payroll amount does notapply

• Experience rating• NYCCPAP

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1

What is the Construction Employment PayrollLimitation Program?

The Payroll Limitation Program applies a maximum payroll limitation foreligible construction classification codes for the purposes of determiningworkers’ compensation insurance premiums.

On June 30, 1998, the New York State Legislature enacted theConstruction Employment Payroll Limitation Law (Chapter 135 of the Lawsof 1998) to provide a more equitable distribution of workers’compensation premium between high-wage paying and low-wage payingemployers in the construction industry.

The law exempts employments engaged in the construction of one- ortwo-family residential housing. The law also creates three geographicrating territories used in calculating premiums.

How will the Construction Payroll Limitation Lawaffect you?

The new law potentially affects any policyholder endorsed withconstruction classifications. The program affects premium in two ways, asit provides for:

1. A weekly payroll maximum for each construction worker.

2. A surcharge based on the location of the job site. (Currently, there isno charge.)

payroll limitation171010_payroll limitation060630 10/10/17 10:44 AM Page 1

2

Who is not affected by the law?

The Payroll Limitation Law does not apply to construction companiesengaged exclusively in the construction of one or two-family houses.However, documentation must be provided (contracts, invoices, etc.)verifying the type of work performed. Premiums for these companies willbe determined based on the traditional methods (total payroll, withoutterritorial surcharges). Companies involved in both residential (one- ortwo-family homes) and non-residential work are subject to the law for theirnon-residential operations.

What qualifies as construction work under thePayroll Limitation Law?

New construction, renovation, repair, remodeling, maintenance of existingstructures and commercial construction are all eligible for treatment underthe law.

Are all types of residential construction exempt?

No, only construction work on one- or two- family detached or semi-detached (no more than two attached units) houses is exempt. Anyconstruction work on apartment houses, co-operatives, three-family-or-more residences, mixed-use one- and two-family dwellings, farms andattached (three or more units in a group of connected houses)townhouses or brownstones is subject to the Payroll Limitation Law,regardless of whether the work is done for an individual owner, renter,building owner, or building manager.

Are chargeable subcontractors and casual laborsubject to the Payroll Limitation Law?

Yes, territorial differentials will be applied to casual labor and uninsuredsubcontractors for work at job sites that are not one- or two-family houses.

Is the law just for construction companies?

No, the law applies to any company with workers in any of the eligibleclassifications.


3

How does the payroll limitation work?

A payroll cap is applied to the actual weekly payroll, per employee, in eachof the eligible construction classification codes. Actual payroll, and not thelimited payroll, is used for employments engaged in the construction ofone- or two-family residential housing.

Which classifications are eligible for the limitationand surcharge?

0042 5069 5223 5479 5610 6216 6319 9534 3365 5102 5348 5480 5648 6217 6325 95393724 5160 5402 5491 5651 6229 6400 95453726 5183 5403 5506

5703 6233 6701 95493737 5184 5428 5507 5709 6235 7536 95535000 5188 5429 5508 6003 6251 75385022 5190 5443 5536 6005 6252 76015037 5193 5445 5538 6017 6254 78555040 5213 5462 5545 6018 6259 82275057 5221 5473 5547 6045 6260 95265059 5222 5474 5606 6204 6306 9527

Maximum chargeable payrolls

The weekly payroll cap amount per employee is two thirds of the NewYork State Average Weekly Wage (NYSAWW), which is updated annuallyby the New York State Department of Labor (DOL). See Workers’ CompPolicyholder/Construction Policies under the Employer tab at nysif.comor visit DOL at https://labor.ny.gov/stats/avg_wkly_wage_shtm for theNYSAWW.

57013737 5184 5428 55075000 5188 5429 55085022 5190 5443 55365037 5193 5445 55385040 5213 5462 55455057 5221 5473 55475059 5222 5474 5606

6233 6701 95496235 7536 95536251 75386252 76016260 7855 6306 8227

95269527


http://ww3.nysif.com/Home/Employer/WCpolicyholder/ConstructionPolicies/PayrollLimitationProgram

http://ww3.nysif.com/Home/Employer/WCpolicyholder/ConstructionPolicies/PayrollLimitationProgram

https://labor.ny.gov/stats/avg_wkly_wage.shtm

4

What are the requirements for recordkeeping?

Detailed bookkeeping is important under the Payroll Limitation Law.

Weekly payroll records must be kept showing each employee’s earningsseparately.

Documents such as contracts, invoices and daily work reports must beprovided as verification for your payroll separation.

Each employee’s payroll must be separated by:

Classification (type of work performed)

Hours worked

Regular pay

Overtime pay

Gross pay

Residential work pay (one or two-family homes)

Commercial work pay (non-residential)

Geographic location (applicable territories for non-residential work)

Holiday, sick, vacation and bonus pay must be shown separately.

What if I don’t supply proper records?

If weekly payrolls are not separated for each construction worker thelimitation will not be applied. A worker would be included at his total salaryeven when earning over the limited payroll.

If payrolls are not separated by territory then all payroll will be allocated tothe region with the next highest surcharge to that of the home office. If thereview of any record indicates that any work was done in the highest ratedterritory, then all payroll would be assigned to that territory.

If work done on one- or two-family homes is not separated, all payroll willbe considered commercial with territorial differentials applied; however,the limitation will not be applied.


5

Special recordkeeping rules

Rules for special record-keeping situations most-likely to arise:

• Vacation, holiday and sick pay belong in the territory of theemployer’s home office.

• Bonuses are spread across the entire policy period.

• Deduct payrolls for one- or two-family residences before calculatingthe limitation.

• Deduct premium overtime and wrap-up job payrolls beforecalculating the limitation.

• Officers in construction codes will be assigned the lower of thepayroll limitation maximum or the traditional officer maximum. Onlyone form of maximum will be applied during the policy period.

• Sole proprietors and partners in construction codes who requestcoverage are charged at the statutory minimum payroll.

• The entire salary of a construction employee working in more thanone territory in a week belongs in the territory where he spent themajority of his time.

• In computing the limitation for a worker in more than oneclassification in one week, split the payrolls for each classification inthe same ratio as the gross payroll. For example, a concreteworker involved in both heavy (Code 5213) and light (Code5221) concrete work was paid $1,000 for #5213 work and $500for #5221 work in one week. The total payroll was paid in a 2:1ratio. Therefore the limited payroll will be split in the sameratio — $500 in 5213 and $250 in 5221.

• A regular New York employee working on temporary assignment inanother state receives the territory of the employer’s home office.

• A construction employee subject to the U.S. Longshore & HarborWorkers Act belongs in the territory immediately adjoining the waterswhere the work was performed.

• Drivers are subject to the new law only if the construction codeincludes drivers.

• Where the yard classification (8227) has been endorsed, the territoryof the yard location applies.


6

The three New York territories

Is the surcharge different for each territory?

Yes, as premiums must be sufficient to cover claims in the constructionindustry, differentials are applied to offset premiums lost to the limitationin each region. The differentials are adjusted annually. For newpolicyholders, the policy will apply the surcharge of your home territoryunless you provide documentation of work in a different territory.

Territory 1 includes the Bronx, Kings, New York, Queens and Richmond.

Territory 2 includes the counties of Dutchess, Nassau, Orange, Putnam,

Rockland, Suffolk and Westchester.

Territory 3 includes all other counties within the state.

1

2

2

3


7

Sam

ple Payroll Lim

itation Schedule

Pay

Hrs.

Reg. P

ayOT P

ayGross

OT

Adj.

1-2 Fam

ilyTerr.#

3Terr.#

2Terr.#

3Terr.#

2Date

at 1-1/2Payroll

Prem

iumGross

Hom

esCode 5

183

Code 5

183Code 5

183Code 5

183

Before

Before

With

With

Limitation

Limitation

Limitation

Limitation

8/440

$1,500

$0

$1,500

$0

$1,500

$1,500

$1,305.92

8/1150$1,500

$487.5

0$1,987.5

0$162.50

$1,825

$400

$1,425

$1,305.92

8/1850$1,500

$487.5

0$1,987.5

0$162.50

$1,825

$1,825

$1,305.92

8/2550$1,500

$487.5

0$1,987.5

0$162.50

$1,825

$1,825

$325

$1,305.92*

$0

*In the week of 8/25

the employee w

orked in both Territory 2 and Territory 3. Since the majority of the em

ployee’s time was spent in

Territory 3, the entire limited payroll takes Territory 3.

(Hypothetical exam

ple of weekly lim

ited payrolls. See Page 3 for inform

ation about maxim

um chargeable payrolls.)


8

More special situations

• If only annual payroll is available for an employee, can the annualpayroll be divided by 52 weeks to arrive at a weekly payroll?

No, only the actual weekly payroll can be used.

• The Payroll Limitation Law specifically states that the payrolllimitation applies to an employee’s actual weekly payroll. How does thepayroll limitation apply to an employee who earns $1,800 bi-weekly?

The law does not allow for averaging of payrolls. However, if an employeeis paid other than on a weekly basis, the employee’ s payroll amount isdivided by the number of weeks that apply to a paycheck, and is subjectto the maximum chargeable weekly payroll cap.

• If an employee didn’t work a full week, how is payroll limitationapplied?

A partial week is considered a full week in determining an employee’ sweekly pay for payroll limitation purposes.

• Is a covered sole proprietor or partner’s weekly draw subject to thelimitation?

No, the weekly draw is not subject to payroll limitation and the minimumremuneration for sole proprietors and partners applies.

• If an employee’s payroll is below the payroll limitation maximumamount, does the territory premium differential still apply?

Yes, the territory premium differential applies whether or not a limitedpayroll amount applies. Separate weekly payroll records, by employee,must be maintained to determine the appropriate differential. Territorypremium differentials do not apply to the construction of one- or two-family residential housing.

• Is the territory premium differential subject to experience rating?Yes, the territory premium differential is applied prior to the experiencerating.

• Does the New York Construction Classification Premium AdjustmentProgram (PAP) still apply?

Yes, as of 4/1/01, the PAP credit is based on limitation payrolls.


For more information

If you have any questions regarding Payroll Limitation, or if you needassistance in preparing your payroll records, our premium audit staff canassist you at the following phone numbers, or during your audit.

Albany518-437-8982

Binghamton607-741-5055

Buffalo716-851-2147/2100

Bronx, Queens

212-587-7390

Brooklyn, Staten Island212-587-7390

Lower Manhattan212-587-7390

Upper Manhattan

212-587-7390

Nassau631-756-4219

Rochester585-258-2000

Suffolk631-756-4492

Syracuse315-453-6513

White Plains914-253-4866/4865


THE CONSTRUCTION EMPLOYMENTPAYROLL LIMITATION PROGRAM

THE NEW YORK STATE INSURANCE FUNDWorkers’ Compensation and Disability Benefits Specialist since 1914

Then...Now...Always TM

nysif.com

Andrew M. Cuomo, Governor

Kenneth R. Theobalds, Chairman

Eric Madoff, Executive Director/CEO

10/17


The Construction Employment Pa yroll Limitation Program

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Transcript of The Construction Employment Pa yroll Limitation Program