Follow-Up: What Architecture & Engineering Firms Should Expect After the New York Workers’ Compensation Classification Changes
Written by Promark Partners
Earlier this year, we published an article discussing an important change to New York’s workers’ compensation classification system that affects architecture and engineering firms. The change, implemented by the New York Compensation Insurance Rating Board (NYCIRB), eliminated the longstanding clerical exception that allowed certain employees within design firms to be classified under workers’ compensation code 8810 – Clerical Office Employees.
Under the revised rules, all employees of architecture and engineering consulting firms must now be classified under Code 8601 – Engineer or Architect Consulting & Clerical, regardless of whether they perform technical work or purely administrative duties. The rule became effective October 1, 2024, and many firms are only now beginning to see its practical effects during policy renewals and workers’ compensation audits.
As the industry adjusts to this change, it is helpful for firms to understand why the rule was implemented, how carriers are applying it, and what it may mean for workers’ compensation costs and audit outcomes moving forward.
For many years, architecture and engineering firms were able to separate payroll into two workers’ compensation classifications. Professional and technical staff were typically assigned to Code 8601, while purely administrative employees (such as receptionists, accounting staff, or payroll administrators) could often be placed in Code 8810, provided they met the strict clerical criteria. Because Code 8810 reflects a much lower workplace injury exposure, it generally carries significantly lower workers’ compensation insurance rates.
The NYCIRB determined that maintaining a separate clerical classification within professional consulting firms created classification inconsistencies and administrative challenges. As a result, the Board revised the classification rules to consolidate payroll within architecture and engineering consulting firms under Code 8601. The practical effect of this decision is that the clerical exception no longer applies within these firms. Even employees who work exclusively in an office setting and never visit job sites must now be classified within the 8601 category.
For many firms, the most immediate consequence of this change will be an increase in workers’ compensation costs. Administrative staff who were previously classified under the lower-cost clerical code will now be included in a classification that generally carries higher insurance rates. The overall financial impact will vary from firm to firm and will largely depend on the proportion of payroll that had previously been assigned to the clerical classification. Firms with large administrative teams may notice a more significant shift in their premium structure than those with smaller support staff.
Another important point for policyholders to understand is that this rule change is applied based on the nature of the business, rather than the specific duties of each employee. In other words, the determining factor is that the firm itself is an architectural or engineering consulting operation. Once the business falls within that classification, the payroll for all employees within that firm is subject to the same workers’ compensation classification code. This can understandably be confusing for employers who feel that clerical staff should still qualify for a clerical classification based on their individual job duties, but under the revised rules, the classification is tied to the firm’s overall operations rather than the individual employee’s exposure.
Many firms are now starting to encounter the practical effects of this change during their annual workers’ compensation audit. As carriers and auditors begin applying the revised NYCIRB classification rules, they are reviewing payroll records to confirm that employees have been reported under the correct classification codes. If clerical employees were still reported under Code 8810 after the rule change took effect, the auditor may reclassify that payroll under Code 8601 as part of the audit process.
When this occurs, the result may be an adjustment to the policy’s final premium. Because workers’ compensation premiums are calculated based on actual payroll and classification codes, moving payroll from 8810 into 8601 during an audit can increase the final premium owed for the policy period. In many cases this does not indicate that the firm made a mistake, but rather reflects the transitional period following the rule change as the industry adapts to the updated classification structure.
Going forward, however, it is likely that carriers will apply this rule consistently during renewals and audits. For that reason, firms should take the opportunity to review their payroll reporting practices to ensure they align with the updated classification rules. Some payroll systems still default to clerical classifications for administrative staff, which can inadvertently create reporting discrepancies if those codes are automatically used for workers’ compensation reporting.
As architecture and engineering firms continue to navigate the change, it may also be appropriate to consider the broader financial implications. Because workers’ compensation premiums are often incorporated into overhead calculations, the shift in payroll classification may affect insurance budgeting, project costing, and overall operational planning. Firms that rely heavily on administrative staff may want to evaluate whether these changes influence internal cost allocation or billing structures for professional services.
At Promark Partners, we have been working closely with our architecture and engineering clients to review payroll classifications, understanding insurance carriers' "blended" rating structures, discuss the potential financial impact of these changes, and prepare firms for upcoming workers’ compensation audits. Understanding how regulatory changes affect insurance costs is an important part of effective risk management and financial planning.
As with many regulatory changes, the key to avoiding surprises is preparation. Firms that proactively review their payroll classifications and understand how the new rules are being applied will be better positioned to navigate renewals, audits, and long-term budgeting considerations under the revised system.
If your firm has questions about how these changes may affect your workers’ compensation policy, or would like assistance reviewing payroll classifications in advance of an audit, we are always here to help.