NYSIF WC audit with out of state payrolls
Workers Compensation audits with the New York State Insurance Fund can often be complicated and stressful undertakings. Some of the potential
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issues employers may face are weekly payroll limitations, the use of independent contractors & subcontractors, and wrap ups. Another issue that can often go overlooked and prove to be just as costly is how to address WC audits with out of state payrolls.
The general belief is that the State Fund does not cover out of state injuries. As such, New York employers insured with the Fund will take one of two routes to address the prospect of out of state work:
1. Do not take out of state work. This is by far the simplest method to avoid issues at audit. However, this is not always practical as employers can be missing out on profitable work.
2. Purchase a Work Comp policy to cover the out of state work. This will allow employers to pursue the out of state work and ensure there is proper coverage for their employees.
Purchasing a policy to cover the out of state work seems simple enough but what happens at audit? As employers will now have to deal with two Workers Comp audits great care needs to be taken when documenting the out of state payroll to avoid being charged twice. Employers erroneously believe the simple fact of having another policy is all they need to ensure the out of state work is not picked up by the NYSIF at audit. This is far from the truth.
You may be thinking to yourself how can the State Fund charge for out of state payroll especially there is another policy specifically in place to cover it? It all comes down to the jurisdiction for any potential employee injury claims. There are several factors that can determine where an employee can file for workers comp benefits. Three of those factors are where the employee worked, where they were paid, and where they lived. Depending on the circumstances even though an employee can sustain an injury on an out of state jobsite, they may still be able to file their claim in New York with the State Fund. As such, the State Fund will attempt to collect premium on the out of state payroll in order to cover these potential claims.
What can be done to avoid this?
Depending on your particular situation steps can be taken to mitigate possibly nullify The New York State Fund’s ability to charge for out of state payrolls.
0. Purchase a Workers Comp policy to cover the out of state work. Step 0? While this was addressed above allows another insurer to fund the risk of potential claims it does not reduce the State Fund’s ability to charge for the out of state payroll in of itself. It only sets the ground work without which there would be little to no possibility to reduce your out of state payroll burden with the State Fund.
1. Clearly document what payroll was earned in-state and what was paid on out of state jobs. Being able to show what payroll was earned where will aid the auditor in determining what should be included in audit. As with point 1, this will likely not be sufficient on its own.
2. File and pay taxes on the payroll earned out of state with that state. The first thing any NYSIF auditor will do is review your quarterly NYS-45 payroll tax forms. Any payroll on the NYS-45 forms could be deemed to have been earned in New York and as such could get picked up at audit. Filing payroll taxes in another state for the payroll earned in that state can be burdensome on both the employer via added administrative costs but also employees as they will now have to file a second state income tax return. Employers should investigate the pros and cons to determine if the cost benefit is worth the added complexity.
3. Use out of state employees. If an employee both lives and works outside of New York State, there is little possibility the State Fund will pick them up at audit. This is especially true if this step is used in conjunction with step 2. For simplicity, (smaller) employers may incorrectly include their employees living and working out of state as part of their New York payroll.
While the steps outline can seem daunting and possibly overwhelming, they do work. By applying these steps we recently help a client save nearly $140,000 on a workers compensation audit with the State Fund.
Contact a Risk Advisor today by CLICKING HERE to see how Metropolitan Risk can assist you in navigating the quagmire of your NYSIF Workers Comp audit with out of state payrolls.
