If you’re in the construction industry in California, you know the state has some very specific rules and regulations regarding workers’ compensation. And if you’ve been paying into your workers’ comp policy for any length of time, you may have heard of the state’s dual wage classifications.
In 2022, the California insurance commissioner updated those dual wage classifications significantly. This year, the Workers’ Compensation Insurance Rating Bureau (WCIRB) made further updates that decreased the low-wage threshold for some construction jobs by $1, from $39 per hour to $38. Changes were effective September 1, 2023, for all new and renewed policies.
Will those updates impact your premium rates? And what is the dual wage system anyway? Let’s get down to answering these questions and more.
What Are the New Dual Wage Thresholds?
The WCIRB updates to the construction classifications this year lowered hourly wage thresholds by $1 per hour (from $39 to $38) for jobs in excavation/grading/land leveling, sewer construction, and water/gas mains. Other categories like steel framing and carpentry didn’t change from their $39 threshold.
Here’s a list of the main changes to California's dual wage classification thresholds:
What Is the Dual Wage Threshold, Anyway?
The dual wage threshold is a system that assigns each specific job two workers’ comp classification codes, a low- and high-wage code based on the employee’s hourly wage. In California, it applies primarily to the construction industry.
For example, let’s look at plastering or stucco work. The wage classes for these particular jobs are 5484 and 5485.
Your plaster worker who makes more than $36 an hour is considered to be in the high-wage classification, which is 5485. Workers who make less than $36 an hour are assigned to the low-wage class code, 5484.
How Do the Dual Wage Classification Thresholds Impact My Workers’ Comp Premiums?
Dual wage classification thresholds have a profound impact because you’re probably paying significantly more in workers’ compensation premiums for your low-wage workers than your high-wage employees—possibly as much as double the rate.
The way your insurance company sees it, if you have a worker who is paid, say, minimum wage or just above it, they are likely to be workers who lack experience and may not be as safety-conscious as more experienced, highly-paid employees.
Unfortunately, they may be right.
Statistics show that if you have an employee who has 20 years of experience in sheet metal work, for example, they know their trade well enough to be able to avoid hurting themselves while handling their tools and working with large pieces of sheet metal.
The employee who just started working in the trade? Maybe not so much.
How Can the Construction Dual Wage Threshold Save Me Money?
The changes are good news because you’ll automatically save more money on your insurance services with the new lower-wage thresholds, but you can save even more by giving some workers a pay raise.
Confused? Let’s explain.
If you give your employees who are near the threshold a raise to bump them from the low- to high-wage category, they’ll cost less to insure. Since higher-wage employees cost less to insure (remember, sometimes half as much!), your premium should go down when this happens.
Yeah, it’ll cost you a bit more in wages, but you may save significantly more on your workers’ comp premiums. You can ask your insurance broker what your new premium might be and then calculate which option saves you more.
The other benefit? Your employees are likely to be happier and more motivated by the increased wage rate.
How to Save the Maximum on Workers’ Comp Premiums
There are more ways to save on your workers’ comp than waiting on changes to dual classification thresholds. Here are two you can get started with:
Have Accurate Timecards
When looking at compensation rates and corresponding workers’ comp premiums, there’s one caveat you should be aware of as a business owner: you’ll need to keep accurate and comprehensive records to benefit from the new thresholds.
When you have your workers’ compensation audit, you’ll need to present verification of each employee’s total hours worked, their daily start and stop times, and even the start and stop times for any unpaid meal breaks.
Fortunately, Hourly can do that all for you. The payroll, time tracking, and workers’ comp platform logs everything instantly via smartphones, making sure your records are accurate down to the penny.
Create a Safer Work Environment
Keeping accurate records is one way to save the maximum. Still, there are other strategies you can take advantage of to ensure you’re getting the best bang for your buck when it comes to your insurance premiums.
For example, always make sure your employees know that safety is your top priority on the job. Involve them in safety training and encourage them to report any hazards or unsafe behavior they see.
Why? Because a safe worksite means fewer claims—and that’s the best way to keep your premiums low.
Make Sure You’re Getting the Best Rate on Workers' Comp
Whether you’re managing workers doing electrical wiring, glaziers, or other types of construction work, you may be able to save significantly on your workers’ comp by giving your workers a small raise.
Construction workers are considered either low- or high-wage by your workers’ comp insurer. Your premium is less for the higher-paid employees and more for those at the low end of the scale.
By crunching the numbers, you may determine that you can save money by increasing the wages of your lower-paid employees so they fit in the higher category.
Now that you’ve got it figured out, it’s time to get out your calculator and see if you can save money on your workers’ comp premiums.