United States
Hong KongPayroll taxes and workers compensation
An employer withholds income tax and the employee share of payroll taxes, pays a matching employer share, and carries workers compensation insurance rated by classification and claims history.
The administrative half of employing people, and the exam tests it because getting it wrong is expensive.
What is withheld and what is added
The employer withholds income tax and the employee's share of payroll taxes from wages, then pays a matching employer share on top.
So an employee costs more than their wage. Meaningfully more. A contractor estimating labor at the hourly rate has understated it, on every job.
Workers compensation
Premiums are based on payroll, on the classification code of the work, and on your claims history through an experience modification factor.
Roofing costs more than office work. The risk is higher, and a poor claims record raises your rate against a firm with identical classifications and fewer claims. Labor costs more than the rate.
It is a direct financial return on a safety program, and it compounds. That is worth knowing both for the exam and because it is one of the few places where doing the right thing pays measurably.
Misclassification
Treating an employee as an independent contractor avoids these costs, and that is exactly why it is enforced against.
Exposure includes back taxes with penalties, unpaid premiums, and an injury claim outside the workers compensation system entirely.
Certified payroll
On public work subject to prevailing wage requirements, records must be submitted on a set schedule showing wages and classifications.
It is a recordkeeping obligation with real consequences for getting it wrong.
Common questions
What does an employer withhold?
Income tax and the employee share of payroll taxes, then pays a matching employer share.
How are workers compensation premiums set?
By payroll, classification code and claims history through an experience modification factor.
Does a safety program reduce premiums?
Yes. The modification factor gives a direct financial return on fewer claims.
What does misclassification cost?
Back taxes with penalties, unpaid premiums, and an injury claim outside the workers compensation system.
What is certified payroll?
Records of wages and classifications submitted on public work subject to prevailing wage requirements.