Roman Empire Insurance Agency · Published
Yes, but the extra overtime premium can be excluded from the payroll used to calculate workers’ compensation premium when the required records support it. The portion paid at the employee’s regular rate remains included. Removing all overtime wages from an audit would be incorrect.
For a business with busy seasons or extended shifts, separating those amounts correctly can make a difference to the payroll used in an audit. Our workers’ comp audit team can help you understand the figures the carrier used.
A simple overtime example
Suppose an employee’s regular rate is $30 per hour and the employee works five overtime hours at $45 per hour. The employee receives $225 for those hours. Of that amount, $150 represents five hours at the regular rate; $75 is the extra overtime premium.
If the employer’s records meet the applicable requirements, the $150 is included in workers’ comp payroll and the $75 is excluded. The employee still receives the full $225. This is an insurance payroll calculation, not a reduction in the employee’s pay. This illustration is not a quote or an estimate of savings on your policy.
The records make the difference
WCIRB calls for pay records separated by employee and summarized by the type of operation performed. The records must show either regular-rate pay for all hours and the extra overtime premium separately, or regular pay for non-overtime hours and total pay for overtime hours.
A single gross-pay total may not establish the exclusion. Keep the underlying payroll registers and time records so the auditor can trace the calculation. The adjustment also depends on the overtime rate: do not apply one percentage to every overtime payment or to your entire payroll.
Special arrangements have different rules. For example, certain farming workers paid by piecework, contract, or measure do not qualify for this deduction. Ask the auditor or your agent to review the rule that applies to your actual payroll.
What to check on your audit
- Match the audit’s policy dates with your payroll report.
- Reconcile gross pay to the auditor’s starting figure, then identify the documented extra overtime premium separately.
- Check how the remaining payroll was assigned to each work classification.
- Ask for the audit breakdown if a figure differs from your records.
An additional bill does not by itself show an error. The policy started with estimated payroll; the final audit uses actual records. For a broader review, read what a professional audit review can change or explore our workers’ compensation services.
California sources
- WCIRB: overtime pay and the recordkeeping conditions
- WCIRB: what counts as payroll
- California Department of Insurance: how the final audit works
General California audit guidance. The applicable rules, policy, records, and facts determine the result. Sources checked October 7, 2026.