How Kickstand Saved a Montana Cannabis Business Nearly $3,000 on Workers’ Comp

The Challenge: Misclassification and High Premium Costs

A marijuana business in Montana operating both a greenhouse cultivation facility and a separate retail dispensary initially faced significant workers' comp costs. The insurance carrier lumped all employees under the higher-rated greenhouse class code (Code 0035 at $2.49 per $100 payroll), disregarding the much lower-rated retail dispensary code (Code 8045 at approximately $0.75 per $100 payroll). This misclassification resulted in an exorbitant annual premium.

What are Class Codes?

Workers' compensation premiums are calculated based on class codes, categorizing employees by their specific job tasks. Each class code carries a different rate reflecting the risk level. High-risk jobs incur higher premiums, while lower-risk tasks cost significantly less.

Misclassification or lumping all employees into one high-risk category can cause businesses to significantly overpay.

What is Payroll Splitting?

Payroll splitting allows businesses to allocate payroll across various class codes, particularly when employees perform clearly distinct roles at separate locations. 

Payroll splitting is usually not permitted for non-construction industries, as all tasks typically fall under a single governing class code—the riskiest task performed by the employees. 

However,when operations are clearly distinct, especially geographically separate as with cultivation and retail operations in the cannabis industry, payroll splitting can be allowed—even in non-construction businesses. This unique circumstance is precisely what Kickstand leveraged to help the Montana cannabis business save significantly on their workers' comp premiums.

If your business operates distinct locations or has clearly separate job roles, payroll splitting might save you thousands.

Kickstand Note: 

Payroll splitting is applied between different employees. If an individual employee performs multiple tasks, their entire payroll must be classified under the highest-rated applicable class code. You cannot split an individual employee's payroll.

The Solution: Payroll Splitting Based on Separate Locations

After reviewing the company's operations, Kickstand identified substantial savings through payroll splitting. Employees at the cultivation facility rightly stayed under class code 0035 ($2.49 per $100 payroll). The retail dispensary staff, however, was reclassified under the retail dispensary class code 8045 at just $0.75 per $100 payroll.

By accurately splitting payroll—$230,000 for cultivation and $200,000 for retail—Kickstand dramatically reduced the premium.

The Results: Substantial Savings

Thanks to payroll splitting, Kickstand Insurance cut the client's annual workers’ compensation premium from an initial estimate of around $10,707 down to approximately $8,000, delivering substantial annual savings.

Takeaway: Payroll Splitting Pays Off

Many businesses don't realize they can significantly lower their premiums by splitting payroll when operations are clearly separate. Accurate classification and leveraging lower-rated class codes are essential to achieve these savings.