The SAG-AFTRA Short Film and New Media signatory agreements allow you to defer payment to your performers, as long as they agree to the deferment terms. This means the performers do not get paid until the terms of deferral are met, which most commonly would be when the project is sold or picked up for distribution. P&H/H&R contributions, as well as payroll tax obligations, are also deferred until payments are actually issued to the performers, but workers compensation insurance coverage is required by law at the time work takes place.
Insurance options & payroll
Having employees work without workers compensation coverage puts the employer at risk of violating state law and SAG-AFTRA requirements and is also a significant liability risk to the employer in the case of an un-insured accident or injury.
This can create complications when payments are deferred because Productions often rely on payroll services for workers compensation insurance coverage—if there is no payroll to process, the payroll house would not be involved. This also becomes a problem when employers try to obtain affordable insurance coverage through payroll by stating their intention to pay performers, and then canceling payroll services afterwards to try and avoid actual payroll costs. Attempting to defer payments after-the-fact is not only in violation of the SAG-AFTRA deferment option, but in most cases also constitutes insurance fraud against the payroll house.
When payment is being deferred, Productions must obtain workers compensation insurance coverage independently, either from an insurance company or through an insurance broker. A payroll house cannot provide insurance coverage when performers are not going through payroll; only those being paid are covered. This means that there are two clear options: either performers are being paid and workers compensation is provided through payroll, OR performers are deferred and workers compensation is obtained through an insurance specialist.
3rd party coverage and State Fund insurance
Be careful when using a co-production company or other 3rd party to obtain insurance coverage. Some companies will advertise themselves as a co-production company that can also provide workers compensation insurance coverage for your cast and crew but will then only sell copies of their own policy without providing any actual coverage. If the co-production company is not hiring or paying your employees, and there is no co-production agreement or contract listing the terms of coverage they are providing, then your employees are likely not being covered under the policy. This has been particularly common with companies who use State Fund insurance and try to sell their policy to Productions—State Fund does not allow 3rd parties to be covered under any policies they issue.
Deferment must be agreed to by both the production company and the performers prior to work taking place. It is the obligation of the employer to negotiate deferment with their performers, or else pay everyone out according to the normal SAG-AFTRA pay schedule. Additionally, when you sign a payroll services agreement, you are agreeing to pay out your performers. Even if the union allows deferment, this does not mean you can ignore your contractual obligations to the payroll house because getting an “okay” from the union to defer wages does not provide a free pass to commit insurance fraud against the payroll company.
There are also restrictions on what may or may not be deferred under the Short Film/New Media agreements. Pay items such as meal penalties and double overtime cannot be deferred in any situation, which means you should plan your payroll and insurance options carefully if you will be working long hours.