The USL&H Audit Reopens a Year You Already Closed
The comp audit came back for forty grand you never saw coming, against a year that was already booked as profitable.
A shoreside trade gets one policy, one mod, and one audit, and the only argument is which class code applies. Marine has the same guy on shore Monday, on a spud barge Wednesday, and assigned to a vessel Friday, and the rate spread between those buckets is wide enough that the audit is really a payroll allocation fight. With no day level records tied to a vessel, the carrier allocates for you and you pay whatever number they pick.
The size of it
A five figure audit bill hits in month 13 against a year that's already closed, and there's no way to argue it down because the payroll was never coded to covered versus non covered work in the first place.
You can't buy one workers comp policy for marine work. Payroll on or adjacent to navigable waters falls under the Longshore and Harbor Workers Compensation Act, and the Supreme Court held in Sun Ship v. Pennsylvania that the Longshore Act supplements state comp rather than supplanting it, so the same payroll can fall under two regimes. Crew assigned to a vessel fall under the Jones Act, which requires maritime employers liability, and every barge and tug needs hull and machinery plus protection and indemnity. USL&H rates run several times the shoreside rate for the same job classification, the deposit premium goes out up front, and the year end audit reallocates payroll between covered and non covered work using records most marine subs never kept by day and by vessel.
Three moves, in order
Step 03: Overhead calculation
What indirect cost really comes to at your size, and the rate your estimating template should be using.
What else costs marine contractors money
The same mechanism in other trades
What marine owners ask
USL&H workers comp audit bill surprise marine contractor?
The comp audit came back for forty grand you never saw coming, against a year that was already booked as profitable.
What does it cost?
A five figure audit bill hits in month 13 against a year that's already closed, and there's no way to argue it down because the payroll was never coded to covered versus non covered work in the first place.
What do I do first?
Code every timecard to shore, barge, or vessel, by day and by hull, starting with this week's payroll.
What are marine contractors supposed to be making?
Marine runs 22% gross margin, 15% overhead and 7% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is right on it. The CFOS target is 10.5%.
Which part of the system fixes it?
The step is number 03, overhead calculation. What indirect cost really comes to at your size, and the rate your estimating template should be using. It comes from chapter 3 of CONTROL: The Construction Financial Operating System.
Everything on this page is something you can install yourself, andCONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for marine contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.
Wrote CONTROL, the 8 step system behind these figures. More about the author.