What Counts as Payroll on a Workers’ Comp Audit? (More Than You Think)
6 min read · Updated June 20, 2026
Premium is payroll times a rate — so the definition of “payroll” decides your bill. And it’s broader than the wages on a paycheck. Knowing what’s in and what’s out is how you avoid being charged on money that shouldn’t count.
The auditor’s definition: remuneration
For workers’ comp, “payroll” means remuneration — most compensation for work, not just base pay. That’s why the audit number can be higher than your gross wages line.
What’s generally included
- Hourly wages and salaries.
- The straight-time portion of overtime.
- Bonuses and commissions.
- Holiday, vacation, and sick pay.
- The value of some non-cash perks (e.g. certain housing or meals).
What you can usually exclude
- Overtime excess — the extra “half” of time-and-a-half, in most states (total OT pay ÷ 3 ≈ the excludable part). A few states include full overtime.
- Reimbursed business expenses that are documented.
- Severance, and certain tips, in many states.
The catch: you only get these exclusions if your records separate them out. Lump everything together and the auditor charges the full amount. See the prep checklist →
The big add-on: uninsured subcontractors
The largest surprise isn’t in your own payroll at all — it’s what gets added. Pay a sub who can’t document coverage, and the auditor folds that money into your payroll at your class rate. Check which subs would be added →
Owner and officer payroll
Owners and officers can often be capped at a state minimum/maximum or excluded — so their full salary shouldn’t always drop in at face value. Know your state’s cap and check it.
Bottom line
“Payroll” is wages plus bonuses, commissions, and straight-time OT — minus what you can document as excludable, plus any undocumented subs. Estimate your exposure →
General information for contractors, not insurance advice. Inclusions and exclusions vary by state and carrier — confirm yours.
Frequently asked questions
Is overtime included in workers’ comp payroll?
The straight-time portion of overtime is included. In most states the “excess” half of time-and-a-half is excluded — roughly total overtime pay divided by three — but only if your records separate it out. A few states include full overtime.
Are bonuses and commissions counted as payroll?
Generally yes. Workers’ comp uses “remuneration,” which includes bonuses, commissions, and most paid time off, not just base wages.
Are payments to subcontractors counted as my payroll?
Only if the sub can’t document their own workers’ comp coverage or a valid exemption. An undocumented sub’s pay can be added to your payroll at your class rate.
See your own exposure — free
Two free tools, no signup: estimate your audit surprise, and check whether your subs’ COIs actually protect you.
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