Tips & Tricks
By Brett Findlay, ARM
Workers’ compensation is one of a contractor’s largest insurance costs. It can also be a critical component in bid competitiveness, project eligibility and general profitability. To maximize those items while minimizing your costs, it’s important to do all you can to drive down your premium.
Two ways you can do that are through the Construction Premium Adjustment Program (PAP) Credit and payroll limitation. The importance of these options cannot be understated.
The PAP Credit rewards contractors paying their employees higher wages. The PAP Credit is available to all eligible contractors but is most effective for those in the prevailing wage sector. It regularly applies credits between 5-15%.
To be eligible for the PAP Credit, your classification must be listed on the application itself. If you’re unsure whether your classification(s) are listed, ask your agent. There are 80+ eligible construction classifications.
It’s also necessary to have a posted experience modification factor. This is more commonly referred to as your EMR. In order to qualify for an EMR in New York State, you must be in business and have carried workers’ compensation for an experience period of two years. Your exposure (payroll) must have also produced an annual premium of at least $5,000. For more information on PAP Credit eligibility, you can refer directly to the NYS Compensation Insurance Rating Board website.
Finally, you must complete a one-page application annually. You can fill this out physically or electronically, though the results are typically faster online. Once processed, you’ll see any potential credit applied to your policy at renewal. You should fill this out before your next renewal, but you can have it applied retroactively, too.
Payroll limitation is also available to eligible construction classifications. Review your payroll on a weekly basis to determine if payroll limitations are applicable. Effective July 1st, 2022, the new cap is $1,688.19. This is a 5.5% increase from the prior years’ cap of $1,594.57.
That means eligible contractors may limit the payroll they report to their workers’ compensation carriers. If individual employees earn weekly wages above $1,450.17, you can limit the payroll you report on your workers’ compensation policy to that amount.
It’s important to note that while employees are earning overtime wages, it’s only necessary to report their regular wages. Not all wages are equally reportable when overtime is included. Over a year, you may significantly limit the premium you pay on payroll.
So many contractors are eligible for these programs yet so few utilize them. If you have any questions about your workers’ compensation program and its eligibility, please do not hesitate to contact us.
For more information please contact Brett Findlay, Vice President Business Risk Specialist at (315) 280-6376 or BFindlay@OneGroup.com
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.
Please note coverage can not be bound or a claim reported without written acknowledgment from a OneGroup Representative.
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