Bonuses And Gifts And Workers Compensation Remuneration

Are Employee Bonuses Included in Your Workers’ Comp Premium?

As you plan year-end bonuses and employee gifts, you need to understand how they affect your workers’ compensation premium. The answer isn’t always simple, but the rules are clear once you know what to look for.

Your workers’ comp premium is based on your total employee remuneration—a technical term for all forms of payment your employees receive. This goes beyond regular hourly wages or salaries. For premium calculation, “payroll” includes most cash payments and their equivalents.

What Counts Toward Your Premium

The general rule is clear: if a bonus or gift acts like cash, it is included in the payroll figures used to calculate your premium.

This typically includes:
* Cash Bonuses: Year-end, performance, or holiday bonuses.
* Gift Cards and Certificates: These are treated as cash equivalents.
* Incentive Pay: Bonuses paid for meeting safety or performance targets.

What Does Not Count Toward Your Premium

Not every reward or perk increases your premium. The key difference is that these items are not cash or a cash equivalent.

The following are generally excluded from payroll calculations:
* Tickets to Events: Company-provided tickets to a sporting event, concert, or theater.
* Travel Perks: An airline flight or other travel rewards.
* Company-Provided Vehicles: The value of an employee’s use of a company car.
* Club Memberships: Dues for a gym or social club paid by the employer.
* Special Awards: Payments for a significant discovery or invention.

A Critical Note on State Rules

While these guidelines apply in most states, your specific location matters. Workers’ compensation is state-regulated, and a handful of states have unique exceptions for how they treat bonuses.

For example, some states may exclude bonuses that are not part of a written wage contract or those paid as part of a state-approved safety program. Because these rules can be very specific, you cannot assume a general rule applies to your business.

The bottom line is to classify every payment correctly. When in doubt, document the purpose of the bonus or gift and consult with your insurance agent to ensure you are reporting your payroll accurately.