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Monday, May 4, 2020 | Category:

In an effort to keep us safe from COVID-19, many states and municipalities have mandated that many businesses shut down. In order to support small business, the SBA has instituted the Payroll Protection Program to help small businesses keep their doors open and their employees on the payroll and off of unemployment. A unique consequence of this program is that many businesses are paying employees who are in quarantine and not working.

Because of the shutdown, workers’ compensation claims have dropped, and insurers have recognized that it is not fair for employers to charge rates for normal employee work when they’re not working. The National Council on Compensation Insurance has created a new code, 0012, effective from March 1, 2020, through December 31, 2020, for “Paid Furloughed Employees,” defined as employees who have continued to receive payment during an involuntary leave and not performing any work. This code will charge few to zero premiums for these furloughed employees. Employers should clearly classify furloughed employees as such and keep detailed records of all payments and benefits paid to them while on leave.

Employers do not need to make changes to their current WC policy in order to take advantage of this rule; they can simply reassign payments for furloughed employees to code 0012 at audit. As the employer may want to realize cash flow savings now, they can ask for the current policy to be endorsed to reflect the annualized estimate of payments to furloughed employees on the policy and reduce that payroll from the other codes on the policy. Your broker will be able to help you through this process.

Call Tedford Insurance at 918-299-2345 for answers to any questions about this change.



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