Workers’ Comp Made Simple: FAQs for Contractors

Workers’ Compensation is one of the most scrutinized parts of a contractor’s insurance program — and often one of the most misunderstood.   From job classifications to payroll reporting, the details can have a big impact on your premiums and your audit results. To help clear things up, we had Risk Advisor, Justin Maire, answer some of the most common questions we hear from general contractors, developers, and trade contractors about Workers’ Comp.

Job Classifications

Q: Can my project manager be in a clerical code if they do office work half the time?
A. No — the clerical code is only for employees who do strictly clerical work, with no field exposure. Project managers don’t qualify, since their duties usually include both office and jobsite responsibilities. That being said, the class code for project managers accounts for this mix of work. Because it assumes significant lower-risk office time, the project manager code is typically rated lower than a foreman or field laborer classification.

Q: Why are carpenters and roofers rated so differently if they’re both “laborers”?
A: Workers’ comp rates are based on both the risk of the work and the history of claims. Roofing involves working at heights, and historically those claims tend to be more severe than carpentry-related claims. That’s why roofers carry higher rates. Carpenters still face risks, but the data shows lower frequency and severity. This is also where safety practices can pay off — training, oversight, and risk prevention can qualify you for discounts and help reduce rates, regardless of trade.

Q: How should I classify drive time for a laborer who does multiple duties?
A: Driving time follows the code for the work being performed at the destination. For example, if an employee leaves a concrete job and drives to a framing job, that drive time is reported under framing. There isn’t a separate driving classification for construction workers as it’s already built into the job class rates.

Payroll Inclusions & Exclusions

Q: Is paid time off and/or bonuses included in workers’ compensation payroll?
A: Yes. Workers’ comp is calculated on gross wages, which means all hours worked plus paid non-working time, such as PTO and bonuses. One thing to be aware of though, if an employee is in a dual wage class code, it can sometimes be more cost-effective to increase the base pay (which might qualify for a lower WC rate) instead of paying bonuses, which don’t affect classification.

Overtime

Q: Do I have to pay WC on time-and-a-half, or just straight time?
A: You don’t have to report the full time-and-a-half. Workers’ comp only includes the straight-time portion of overtime, not the extra half-time premium.

Example:

• Regular rate = $20/hour
• Overtime rate (time-and-a-half) = $30/hour
• Employee works 10 overtime hours → $300 in OT pay (10 × $30)

For workers’ comp reporting, you exclude the $10/hour premium portion:

• Straight-time portion = $20 × 10 = $200
• Overtime premium (extra $10/hour) = $100 → excluded

So out of $300 in overtime wages, you only report $200.

That’s why you’ll sometimes hear it described as “two-thirds of overtime pay” being counted.

Q: If my crew works 60 hours a week, does that increase my workers’ comp costs?
A: Not directly. Workers’ comp is based on wages, not hours. So while you do need to report the straight-time wages plus two-thirds of the overtime, simply working more hours doesn’t automatically raise your rates – it’s all tied to actual payroll.

Subtractors & Certificates

Q: Do I have to cover uninsured subs under my WC?
A: Yes. If a subcontractor does not carry their own workers’ comp coverage, you can be held responsible for them under your policy. That means their payroll could be added to yours at audit, and you’d end up paying the premium for their exposure. The only way to avoid that is to make sure every sub you hire has a valid workers’ comp policy and gives you a certificate of insurance as proof.

Q: If my subcontractor gives me a certificate, am I off the hook?
A: Not necessarily. Certificates can sometimes be expired, incomplete, or not match the job requirements. Always review the certificate carefully, and if you’re unsure, call your broker to confirm. They should be able to review or provide assistance to ensure your subs are carrying the proper coverage.

Audits

Q: What if my actual payroll is higher than I estimated?
A: Workers’ compensation carriers are required to perform an audit at policy expiration to verify your actual payroll during the policy period and submit that information to the WCIRB (Workers’ Compensation Insurance Rating Bureau). If you under-estimated payroll, you’ll be billed for the difference; if you over-estimated, you’ll get a refund. To avoid large surprises, many contractors are now using “pay-as-you-go” premium plans, which adjust monthly based on your actual payroll. This keeps cash flow steadier and prevents big bills at audit.

The WCIRB is the agency that governs workers’ compensation and writes the workers’ comp class codes.

Q: Why did the auditor reclassify some of my employees?
A: Occasionally auditors believe an employee’s duties were misclassified and move their payroll into a different code. Sometimes they’re right, but not always. If you disagree, you can dispute it by providing detailed job descriptions and supporting documentation. Your broker can also step in to help make your case.

Q: What do I do if the WCIRB wants to inspect my business?
A: This is normal. The WCIRB usually inspects businesses every 7–12 years, or sooner if there are major changes in operations. They inspect for a couple of reasons: (1) to assign the workers’ comp class codes for your business and (2) they occasionally look for workers’ comp fraud. After an inspection you’ll receive a report that lists the duties of your staff and the workers’ comp class codes they have assigned. Both carriers and auditors are expected to use those codes. If you ever need to dispute an audit reclassification, this report should be the first place you look to provide evidence.

Final Thoughts

Every construction business is unique, and there’s no one-size-fits-all answer when it comes to workers’ comp. But understanding the basics, like how overtime is handled and what payroll items to include, can help you avoid costly surprises and keep your coverage aligned with your operations.

If you’re unsure about how your reporting stacks up, or if you’d like a second set of eyes on your classifications, our team is here to help.