Should you insure Ordinary Payroll?
Learn about Business Interruption Insurance Canada…
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With more than 1,000 blog posts about business insurance Canada products and services, we are proud to deliver coverage insights on subjects that people want to learn more about. This post is all about business interruption insurance and ordinary payroll.
Understanding business insurance Canada products
Business interruption. Among the many decisions you make as an employer, insurance is one of the most important. When you are buying Business Interruption Insurance you need to decide whether to insure ordinary payroll, and, if so, for what length of time.
It is important to consider and revisit this question periodically. Your business insurance Canada needs can change from year to year based on type of operations, plant or office locations as well as the economy.
Here are some basic facts about ordinary payroll that you can use to inform your decision-making.
What is Ordinary Payroll?
Typically, ordinary payroll is defined as the entire expense of payroll for all employees of an insured entity. The only exceptions are officers, executives, department managers and employees who are under contract.
All such, payroll is covered as a necessary expense in the event of a catastrophic loss under a Business Interruption policy.
To learn more about how business interruption insurance Canada works, you can use the search tool in the top right hand corner of every page on our website. Just enter “Business interruption” as a search term. Your search will bring up all pages and blog posts that include information about business interruption insurance.Insurance Info blog – ALIGNED Insurance Brokers
You can also read any of the following posts that contain relevant insights about business interruption insurance Canada.
- Worried about business interruption? A Toronto insurance broker can help
- Need help completing a business interruption worksheet?
- Contingent business interruption: what is it?
- Business interruption coverage 101
- Can a cyber attack cause a business interruption loss?
Ordinary Payroll – some key considerations to be aware of…
In most policies, payroll costs are treated like any other cost incurred after the incident – if costs are necessary, they are reimbursed. Therefore, fundamental employees and labour costs associated with property damage repairs should be reimbursed.
However, when employees are wholly idled as a result of the incident, their payroll is not considered a necessary expense and can only be reimbursed under the Ordinary Payroll Endorsement, which goes into effect for a specified number of days (typically 30, 60 or 90 days) after the business interruption.
This type of endorsement may be necessary to avoid difficulties with union contracts. In other words, an Ordinary Payroll Endorsement is a wise investment for those businesses that have employees considered unnecessary by policy terms but that they would like to keep on staff until after the business is back up and running.
How an Ordinary Payroll Exclusion Endorsement works
An Ordinary Payroll Exclusion Endorsement can also eliminate coverage altogether for payroll expense of employees other than those necessary to the function of the business, which limits your insurance premium but could present a serious risk to your business in the event of a loss.
If you choose not to insure ordinary payroll, be sure to review union contracts or other labor issues that could arise as a result of a catastrophic loss.
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Since day one, we have been in growth mode, most recently acquiring Precept Insurance & Risk Management. Three well-established brokerage firms (with roots going back to 1912) came together in 1998 to found Precept. We are proud to align with our past, present and future as insurance brokers Canada. We are in this together.
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