Definitions for the Employer Compensation Expense Program (ECEP)
The tests for determining whether an employee is employed in New York are the same tests used to determine whether an employee is employed in the Metropolitan Commuter Transportation District (MCTD), substituting New York State for the MCTD as the relevant geographic area. If at least one of these tests is met, then an employee is deemed to be employed in New York.
An employee is employed in New York State if the employee performs services either:
- entirely within New York State; or
- both in and out of New York State, but those performed outside New York State are incidental to the employee's services performed within New York State (for example, the services are temporary or transitory in nature, or consist of isolated transactions).
2. Base of operations
An employee is employed in New York State if the employee’s base of operations is in New York State. (This test cannot be applied if the employee has either more than one base or no base of operations.)
Base of operations means the place at which the employee is continuously located, or if not continuously located, from which the employee customarily starts out to perform his or her functions in or out of New York. It’s where the employee customarily returns to:
- receive instructions from his or her employer
- receive communications from other persons
- replenish stock and materials
- repair equipment used
- perform any other function necessary in the exercise of his or her trade or profession
3. Place of direction and control
An employee is employed in New York State if an employee’s direction and control emanates from only New York State, and the employee performs some services within New York State.
Place of direction and control means the place from which the employer directs and controls the activities of the employee. It is not necessarily the location of the principal office, but rather the point from which basic authority over the supervision of services emanates (for example, the place from which job assignments are made and/or instructions are issued, or the place at which personnel and payroll records are maintained).
Generally, payroll expense means a covered employee’s wages and compensation that are subject to either social security or railroad retirement tax, but with no annual cap applied. This is Medicare wages.
- Specifically, payroll expense for covered employees subject to federal social security taxes means the total wages and compensation as defined in Internal Revenue Code (IRC) section 3121, without regard to section 3121(a)(1). Payroll expense for covered employees subject to the railroad retirement tax means the total wages and compensation as defined in IRC section 3231, without regard to section 3231(e)(2)(A)(i).
- In computing payroll expense, the annual cap of the amount of wages and compensation of covered employees subject to social security tax contained in IRC section 3121(a)(1) and the railroad retirement tax contained in IRC section 3231(e)(2)(A)(I) does not apply.