How Kickstand Reduced a Pest Control Company’s Workers’ Comp Premiums by $13,830
Many businesses pay more than they should for workers’ compensation insurance—and they don’t even know it. By correctly classifying employees and using payroll splitting, you can potentially save thousands on your premiums, just like this North Carolina pest control and interior remodeling company did with the help of Kickstand Insurance.
The Challenge: High Premium Costs
A pest control business in North Carolina that also offered interior remodeling services approached Kickstand Insurance with a common problem. They were paying a lot for their workers’ compensation insurance, and they wanted to find a way to reduce those costs.
The owner had already taken a smart first step by classifying employees under three specific class codes: pest control (code 9014), interior framing (code 5645), and interior construction services (code 5437).
This was a good first step because it meant the business wasn’t lumping all employees under one high-risk code. However, despite those efforts, the company was still paying a whopping $24,000 for their workers’ compensation premiums. There had to be a better solution.
What are Class Codes?
Many business owners aren’t aware that workers’ compensation premiums are calculated based on class codes—a system that categorizes employees by the type of work they perform.
Each class code has its own rate, based on the level of risk associated with that job. For instance, an employee who performs roofing (a high-risk task) will have a higher premium rate compared to an employee who does clerical work (a low-risk task).
Why is this important? If you don't classify your employees correctly—or worse, if you lump all of them into a single high-risk category—you could end up paying much more in workers' comp premiums than you should.
What is Payroll Splitting?
Payroll splitting allows businesses to divide their payroll across different class codes based on the type of work an individual employees performs, especially when risk levels vary.
This is especially useful in construction-related industries, where some employees might be doing high-risk work, such as framing, and the others might be doing lower-risk tasks, such as plumbing or electrical work.
By splitting payroll, a business only pays the higher-rate premium for the employees working on riskier tasks, while benefiting from a lower premium for those performing less risky work.
Kickstand Note:
Payroll splitting applies only across different employees. If an employee performs more than one type of work, their entire payroll must be classified under the higher-rated class code. You cannot split an individual employee's payroll.
The Solution: Payroll Splitting and Shopping for a Friendlier Carrier
Once we identified the potential savings from more precise classification, the Kickstand team got to work. After several deep dives, it turned out that the client could go even further in classifying their employees by using payroll splitting.
For example, some employees were classified under interior construction services (code 5437), but they were really performing plumbing work (class code 5183), which carries a lower rate.
By reallocating these employees’ payroll to the plumbing code, we helped the business save significantly.
In addition to optimizing payroll splitting, the next step was to shop around for a more competitive insurance carrier. This was an important part of the process because insurance rates can vary significantly between providers. By comparing multiple quotes, we found a friendlier carrier willing to offer lower costs without sacrificing protection.
The Results: Substantial Savings
Thanks to payroll splitting and finding a more favorable insurance company, Kickstand Insurance was able to reduce the client's workers’ compensation premium from $24,000 to $10,170—a savings of $13,830. That's a 57.63% reduction in premium costs!
Takeaway: Payroll Splitting Pays Off
Many business owners don’t realize that even within specific industries, different class codes can apply. Take the flooring industry for example, where different materials can have different class codes, including wood, tile, carpet, vinyl, and more. The more specific you can get, the more you can split your payroll, which can save a dramatic amount of money.
Snapshot:
- Industry: Pest Control offering interior remodeling
- State: North Carolina
- Payroll: $500,000
- Original Premium Cost: $24,000
- New Premium Cost: $10,170
- Kickstand Annual Savings: $13,830
Key Takeaway: To save on workers’ comp in construction, make sure your employees are classified under the correct class codes based on the tasks they perform.
Who can use Payroll Splitting?
Payroll splitting is most commonly used in construction-related industries, where various employees specialize in different types of work. Some of the roles that can benefit from payroll splitting include:
- Electricians - Class Code 5190
- Plumbers - Class Code 5183
- Carpenters - Class Code 5403
- Painters - Class Code 5474
- Roofers - Class Code 5551
- Masonry work - Class Code 5022
By splitting the payroll between these tasks, you can ensure you’re paying the correct rate for each type of work and not overpaying for lower-risk activities.
What about Non-Construction Industries?
For non-construction industries, payroll splitting is usually not allowed. Instead, businesses are required to classify all tasks under a single, governing class code—typically the riskiest task the employee performs.
For example, in a landscaping business, employees might perform different tasks such as tree trimming, mowing and blowing, or landscaping. In this case, all employees involved in these tasks would need to be classified under the most risky governing class code, which is tree trimming.
Even though mowing and general landscaping are lower-risk tasks, because tree trimming involves higher risk, all employees performing these tasks would fall under that higher-risk code.
However, there are some exception codes that can be split out even in non-construction industries:
- Class Code 8810 is for clerical office employees who do not engage in manual labor. If your landscaping business has office staff that only handles administrative tasks, such as scheduling or billing, you can classify them under this code, which carries a much lower premium.
- Class Code 8742 applies to outside salespeople who travel and handle sales-related duties but do not participate in manual labor. Classifying outside sales roles under this code can also help lower your premiums.
These exceptions allow non-construction businesses, like landscaping, to lower their premiums by separating out the lower-risk clerical or sales tasks from higher-risk manual labor tasks.
Find YOUR Savings
Contact Kickstand Insurance for a free policy review today and find out how much you could save by optimizing your workers’ comp classifications. Start saving with an instant quote now!
Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.
