Payroll Audits Cover More Than Just Wages

One of the most trying times for a CFO or business owner in the Workers Compensation process is the payroll audit. I had a question posed to me yesterday as to what funds are considered gross wages under a Workers Comp policy. That was a good question.

I decided to list the usual payroll items that are counted during a payroll audit. Each state has its own list of items to be considered payroll. The following is a default list of the most common gross payroll items. Please note there are many exceptions to the list. This is not an exhaustive list – more of an example.

• Wages
• Vacation Pay
• Sick Pay - not paid by a TPA
• Bonuses
• Holiday Pay
• Employee contributions to a 401(k) or other deferred compensation plan
• Employee contributions to a Section 125 Cafeteria Plan
• Auto Allowances
• Market value of lodging provided, i.e. free or reduced rent apartment
• Value of free meals provided by the employer
• Travel or “Show Up” pay
• State Prevailing Wage fringe Benefits paid directly to an employee
• Davis Bacon Wage fringe Benefits paid directly to an employee
• Commissions
• Payments for hand tools provided by the employee, either directly or through a third party

I know of some very strange items being counted as gross payroll. I have seen chickens and pigs being counted in certain situations. The Davis Bacon Wages come from an act established to pay workers a minimum amount on Federal and State contracts. I will cover Davis Bacon Wages in the next post.