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Employer Burden2024-03-06T03:32:41+00:00

Employer Burden Cliff Notes

What is employer burden?2024-03-04T05:28:49+00:00

The term “employer burden” refers to the direct and indirect costs of employing an individual over and above their wages/salary.  Employer burden includes every expense associated with employing an individual.  The employer burden is everything included in the benefits package.

What expenses are included in the employer burden rate?2024-03-04T02:27:11+00:00

Typical expenses that may be included in the employer burden are:

DDS Mandated

  • Electronic Visit Verification Compliance
  • Costs associated with background checks
  • Decide skills needed and job description development (helps ensure compliance with labor laws)
  • Verification of worker’s eligibility for employment

Regional Center Mandated

  • Specific contract requirements from the regional center

Direct Expenses

  • Salary/Wages

Indirect Expenses

  • Employer insurance (Liability insurance, Worker’s Compensation)
  • Legal compliance
  • Health insurance, if offered
  • Paid leave (FMLA, sick time, paid time off)
  • Legally required contributions
    (Social Security, Medicare, unemployment insurance-state and federal)
  • Other technology
  • Training
  • Negotiated benefits in the employment package between you and your employee
  • Other expenses, not mentioned

California Mandated

  • California mandated retirement
Why does the employer burden rate vary between FMS?2024-03-06T03:01:30+00:00

The previous question explained what expenses are included in the employer burden rate.  Many of these expenses are variable and may change based on many factors.

Many expenses associated with employer burden are variable expenses.  When an employer has two different employees, in two different positions, doing two different job duties may have two different employer burdens.

For example, Workman’s Compensation Insurance varies by job classification (duties), the risk associated with the classification, and past claims.  A construction worker has a higher Workman’s Compensation Insurance rate than an office worker.  The same is true for an employee who participates in a 401(k) with a company matching.  This employee would have a higher employee burden rate than the employee who does not participate in the same program.

Other factors that increase the burden rate provided by the FMS may include factors such as regional center requirements (contractual obligations), technology to address Electronic Visit Verification, and expenses to administer employee benefits like health insurance and retirement plans.

Employer Burden

This section is dedicated to providing clarification on why various expenses are included in the employer burden rate and which factors may impact it. During a focus group an IF asked a question and made a statement which encompassed the misunderstanding about employer burden. The founder reached out to the Department of Developmental Services (DDS) regarding employer burden rates and what should and or should not be included in it.

The founder’s concern stemmed from the IF’s questions and regional center’s insurance requirements placed on each FMS may be different. DDS mentioned a specific type of insurance and noted that there are only three (3) regional centers that require that insurance. The DDS representative followed up by saying, “If you don’t want to provide that coverage then you get vendored by a different regional center.” This is when the founder became clear.

After this conversation, the founder developed a small section to provide context regarding some expenses included in the employer burden rate.

DDS Mandated

Electronic Visit Verification (EVV) compliance is mandated. While not all services require EVV, the technology used for EVV is the same each employee uses to clock in and out from their shifts. EVV verification is an additional charge though. Technology based EVV is less expensive than having to hire dedicated staff to enter your employee’s EVV data.

Regional Center Mandated

Each regional center has their own contractual requirements. When the founder met with DDS, he expressed concern about the employer burden being regulated and specifically mentioned insurance. DDS confirmed that regional centers have different insurance requirements and noted that three (3) require a specific insurance coverage while the others do not.

General Liability Insurance

In a focus group, an IF asked, “Why are you charging for liability insurance when that is your cost of you doing business?” This question was echoed in similar manners, with different words, through the various focus groups. This question clarified the disconnect between the FMS’ expenses and expenses associated with co-employing an individual.

The FMS has expenses which may are part of normal operation such as Commercial Liability and Professional Liability Insurance. When the FMS secures insurance for their normal operation, the insurance carrier will gather specific information such as how many employees (full time and part-time), annual payroll, employee duties, length of time in business, and loss history. The FMS may give an exact number of employees and annual payroll or provide an annual projection. Each represents a risk factor. The insurance carrier then provides the company an annual premium.

This is where it becomes tricky. At the end of the year the insurance carrier will ask for final numbers of employees and payroll from the FMS. If the payroll exceeds the insured amount, the number of employees is above those disclosed, or duties extended beyond what was initially disclosed, the insurance company may charge the FMS an additional premium. This additional charge is almost always higher than the initial insurance rate.

Workman’s Comp

Workman’s Compensation rates vary by classification code. Each classification code is assigned to a specific occupation. Each occupation also has a history of claims/losses. A construction work has a higher Worker’s Compensation Rate than an office worker. Insurance rates are specifically related to the carriers claims/losses, loss adjustment expenses, commissions, acquisitions expenses, general expenses, taxes, dividends, and profit. Each insurance carrier has different insurance rates. Also keep in mind, insurance companies are leaving California and insurance rates are increasing as a result.

Unemployment Insurance – California

New employers subject to California UI tax are assigned a 3.4 percent UI rate for two to three years. After that, their contribution tax rate varies, depending in part on how much they have paid in UI benefits. The rate schedule for California UI tax and the amounts of taxable wages are determined annually. California UI tax rates vary from 1.5 percent to 6.2 percent.

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