Work of each employee may fall into one or more classification (class) codes, and the rate charged for each code is based on the past loss experience for that type of work. The class codes and rates were developed and are maintained and updated by the National Council on Compensation Insurance (NCCI). NCCI reviews and updates the loss data collected each year and makes recommendations on class code and rate changes to the State of Iowa Insurance Commissioner. Once approved by the Insurance Commissioner, the class codes and their respective rates are effective January 1 of the following year. Pure (Manual) premium is developed by multiplying the rate times the payroll for each class code, divided by 100 since rates are set per $100 of payroll.
Interchange of Labor
Many members have one or two employees who divide their workday doing different types of work. They may work in various departments such as water, sewer and parks, as well as doing general maintenance on buildings or vehicles.
We follow the Interchange of Labor rule established by the National Council on Compensation Insurance (NCCI) that allows payroll to be allocated to the various codes in which an employee’s work may be classified. Estimated or percentage allocation of payroll is not allowed.
The NCCI rule states:
"Employees may perform duties directly related to more than one work code. In such circumstances, an employee’s remuneration (wages) may be divided between two or more classifications provided that the employer maintains proper payroll records which disclose the actual payroll by classification for each such individual employee. The records must reflect the actual time spent working within each job classification and the employee’s average hourly wage. An estimated or percentage allocation of payroll is not permitted. If the original payroll records do not disclose the actual payroll applicable to each classification, according to NCCI Rule the entire payroll of the employee shall be assigned to the highest rated classification that represents any part of his or her work."
Exceptions: Interchange of Labor is NOT allowed for work codes 8810, 8742 and 8227. (Example; city clerk does clerical work which is classified under work code 8810 as well as leaves the office to read the water meters for the city which is classified under work code 7520. Wages cannot be split between 8810 and 7520, therefore all the clerk’s wages will be assigned to work code 7520.)
Please review how you currently keep payroll records and make necessary adjustments now to allow you to take advantage of the interchange of labor for your next workers’ compensation audit.