What's workmans comp gonna cost me?

[dirk martin]

Right now I'm a one man shop. I cut and sell wood of all shapes and sizes, over the web, all over the world.
I use a table saw, bandsaw, chop saw, and wide belt sander, daily, to fill my orders.

When I cannot handle orders, I outsource work to my nephew, in another state. He has a full featured shop, and can handle orders that I feed him easily. He ships them from his location, also, after I give him the address. Works well.

I don't believe I need Workmans Comp insurance on my nephew, since I use him as a subcontractor. He covers himself, with his own insurance. The rate he charges me, reflects that.

Orders are still too heavy for the two of us.
So, I need to get a bigger shop, and hire an employee or two.
I understand WC insurance will be a percentage of their wages.
For this type of work, in my shop, what percentage can I expect to pay?

[Leo Graywacz]

Best I could do for you.

https://classcodes.com/lookup/workers-compensation-code-2802/

[Nicholas Lawrence]

Best thing to do is call a couple of insurance agents and get some quotes.

[kevin nee]

Workers Comp is an important tool for everyones protection. The law here in Massachusetts. Being fully insured will open a lot of doors. It will just become part of operating expense. I used to call the Tax man and the insurance company my senior partners. There was still some left for me. Good luck, Kevin

[dirk martin]

Thanks for the input everyone. This helps.

Now, I'd like to throw in a twist here, with the following:

When I hit my thumb with the hammer, I blame myself.
When sawdust flies into my eyes, I get angry at myself for being so stupid, and grab my safety glasses.
When I see that board starting to lift on the table saw, I tighten down the hold-down dogs.
My son had a board kick back on a table saw he was using at a neighbors shop a few years ago. 4 stitches. Nothing serious.

In any of these incidents, why would I blame the person whom's shop I was in?
I guess what I'm wondering is, if I pay for my own health insurance, why wouldn't I pay for my own workmans comp?...or some other sort of injury insurance?
Is this all because our society has become so litigious? When billy cuts off his thumb in my shop, is the jury really gonna blame me?
What am I missing?

And now, as a side-light....
My brother had to tear down an old barn. It was old and rickety.
He wasn't about to hire someone else to do it, and he's too old to do it himself.
But, he lives in an Amish community.
The Amish lined up for the work, to rip it down....at a very reasonable hourly rate.
If they get hurt, working for you, they'd never even consider suing you.
To them, it's common sense. Their mistake, their fault....and I'd feel the same way, if I was working for any one of you reading this.

So, again...has most of the world lost their senses, or what am I missing?

[Rich Engelhardt]

So, again...has most of the world lost their senses, or what am I missing?You dance with the devil when you hire out work to be done by people that don't have - insurance - workman's comp - proper certifications and licences - proper permits......


When billy cuts off his thumb in my shop, is the jury really gonna blame me?Yes - you'll probably be on the list, along with the saw manufacturer and anyone else his attorney can think of.

[Mark Bolton]

Buy QuickBooks and set up their workman's comp program through a p inelego and you'll never look back it's a pay as you go plan you pay for whatever hours your employees work for that given week you don't pay an annual premium and you're done it's the easiest way to deal with workman's comp.

[Jerome Stanek]

Buy QuickBooks and set up their workman's comp program through a p inelego and you'll never look back it's a pay as you go plan you pay for whatever hours your employees work for that given week you don't pay an annual premium and you're done it's the easiest way to deal with workman's comp.


Workers comp is different for each state

[Kevin Jenness]

Dirk,

When you hire someone to work in your shop it is your responsibility to provide safe working conditions. If they get hurt, the fault may be yours, may be theirs, may be a mix. You can sort it out in a nice expensive civil suit that enriches the lawyers for both parties, or you can protect yourself from litigation by carrying workmen's compensation insurance. Like it or not, that's the way the world works. If you don't want to play, keep using legitimate subcontractors.

The good news is, if you keep your shop up to scratch with proper guarding, training, documentation, etc. and avoid accidents by making it easy for your employees to work safely (and insisting on it) your rates will be lower than otherwise. Good luck.

[Wade Lippman]

Consider charging a bit more to reduce your orders and increase your profit. Hiring someone can be a nightmare.

[Bradley Gray]

Consider charging a bit more to reduce your orders and increase your profit. Hiring someone can be a nightmare.

Good advice. A good start as you will need to charge more anyway if you hire help.

[Leo Graywacz]

Just remember you, yourself cannot claim something on WC. It is only for the employee(s). Our state at one time was going to impose a law that mandated all business needed WC, even single owners. But the rule stated that single owners couldn't collect and would only be adding to the pool of money. That floated like a bag of rocks.

And we all know that the money from those taxes would end up in other places, being borrowed from programs that have excess money.

[jack duren]

You need to talk to the right people for your state. Here and there varies. I was in the same position about 10 years ago. Too much for me and on the edge of hiring a helper. The crash got me and didn't have to deal with it....

It's a big step...

[Rich Engelhardt]

I believe you also need to figure in things like withholding taxes & Medicare once you open the WC Pandora's box.

[Leo Graywacz]

That has nothing to do with WC and everything to do with having an employee.

[jack duren]

Why he needs to talk to the right people...

[Van Huskey]

Now, I'd like to throw in a twist here, with the following:

When I hit my thumb with the hammer, I blame myself.
When sawdust flies into my eyes, I get angry at myself for being so stupid, and grab my safety glasses.
When I see that board starting to lift on the table saw, I tighten down the hold-down dogs.
My son had a board kick back on a table saw he was using at a neighbors shop a few years ago. 4 stitches. Nothing serious.

In any of these incidents, why would I blame the person whom's shop I was in?
I guess what I'm wondering is, if I pay for my own health insurance, why wouldn't I pay for my own workmans comp?...or some other sort of injury insurance?
Is this all because our society has become so litigious? When billy cuts off his thumb in my shop, is the jury really gonna blame me?
What am I missing?



A good bit.

Workers Comp is a compromise between the interests of the employer and the employee.

Without the Comp system in place workers both the employee and the employer would both be responsible fully for their own actions and these would fall under standard negligence law which traditionally had no caps and in certain circumstances might have additional "penalties" in the form of punitive damages. One severe injury to a worker that the employer was deemed by a court to reach the threshold for recovery (under particular state law) could bankrupt a company if uninsured or significantly over the limits of any liability coverage the employer carried.

Comp give the employer a maximum loss which insurance companies can use to determine premiums and gives the worker covered access to medical care as well as some coverage for loss of wages (usually something in the range of 2/3 AWW calculated over the last 52 weeks based on state law) without regard to fault. If a third party is wholly or partially responsible (in the latter case the % of fault would have to meet the state's negligence laws) there is the possibility for the employee to go after them in civil court and if they prevail the comp carrier would have subrogation rights.

The system is actually a decent compromise for all, the employer has limited liability (capped), the worker does not have to prove fault and in most cases doesn't have to go without a paycheck or rely on personal medical insurance for care. All of this results in a streamlined system that avoids the expense of civil court with most claims being handled by adjustment and the few that don't deal with "simple" proceedings in front of ALJs instead of a jury trial which could be highly complex on just the fault issue especially with a larger company that might require the litigation of agency issues.

On the Amish hypothetical they would likely be considered sub-contactors (providing their own tools etc) and would have limited recourse anyway.

Understand this is an extreme simplification of the Comp system but it is a true compromise and from the employers perspective like all insurance it is a mitigation of risk by the spreading of potential liability across many employers and prevents some from catastrophic liability. IMO it is one of the better-balanced systems for all involved.


BTW when Billy cuts his finger off in your shop to you really want to be litigating ever aspect of your shop safety protocols, your choice of equipment, the maintenance level of the equipment, the lighting level in your shop, etc when you find out Billy was just working his college summer at your shop and prior to the injury, was a consensus to be the first round pick in the NBA draft or poised to be a concert pianist, or a surgeon or...

[Mike Jungers]

Lots of good advice given here; the way to tell what is good advice is if it sounds complicated and expensive, it's good advice.

Your question has a simple answer and a good answer. The simple answer is that costs vary by job classification and area. Here in Missouri my guys are at about 13% but that includes coverage for the remodeling work we do also.

The good answer is before adding employees, you should take a good look upstream from the workman's comp question and go over your accounting and job costing systems. Figure out how to add payroll and time keeping so everything lives in the computer and not on paper. That may ruffle a few feathers but I've run my business both ways and I wouldn't be in business now without the ability to know to the penny what all my costs are. To do that I use Quickbooks desktop, T-Sheets for time tracking, and Gusto payroll. I can track employees time spent on each customer's work, what they are working on (cutting, assembly, sanding, etc.), and compare what a job costs to my estimate. Gusto pays them with direct deposit, files all my state and federal taxes, pays AP Intego for the workman's comp, and deducts money every week to pay for all of it. I cannot stress enough how much time and headache you can save yourself by diving in and figuring out how to do everything electronically.

Whatever you do, don't pay a guy cash under the table to even set foot in your shop. None of my guys have gotten hurt at work, but I sleep better at night knowing they will be taken care of and I (likely) won't go bankrupt.

Good luck.

Mike

[kevin nee]

I was an Incorporated business, and became an employee of that company. Therefor I was covered by WC. The people I did work for required a certificate of WC & Liability before I started work. People that require this type of documentation usually are no nonsense and pay their bills as agreed and understand that EXTRAS are what happens on jobs. You have to be prepared to open your books and tax filings to insurance auditors. I was a one person company and I got a check with all withholdings taken out. The SEP Pension plan is also a fabulous tool. You can put 25% of your pay in a retirement account. Good luck on your decisions,

[dirk martin]

Wow...glad I asked.
This makes me REALLY lean towards hiring folks as sub-contractors, to work in their own shops. It may be a bit more difficult, since I have to limit hiring to people that have the needed machinery, but with the money I'm saving by not having all these extra expenses, I could probably help outfit their shops.

Something just seems broken here.
Amish men can come and help me in my shop all day and night, and neither I, nor they, lose any sleep worrying about an injury.
I'm a grown man. When I step foot into someone elses shop, I can decide for myself if the shop is safe enough. Why on earth would I sue him, if I got hurt?

But, whatever. It clearly seems that going with the sub-contractor, the way to go....and to hire the Amish, even better yet...people with common sense.

[Brad Adams]

Dirk it's not you that would sue someone for getting hurt in there shop... But your insurance company wouldn't hesitate to sue him to cover the damages. DAMHIK. Been there before.

[dirk martin]

Ohhhhhh.
You mean it goes like this?

I go visit my neighbor.
I ask if I can use his tablesaw.
It's a little dark in his shop, but I only need to make 1 cut.
I'm not paying attention while making the cut, and run the blade into my hand.
I rush to the hospital, and Blue Cross Blue Shield is my health ins. carrier, and I file the claim with them, and they cover my injury.

Are you telling me that BCBS will perform an investigation, and THEY will look into suing my neighbor?
Even if I refuse to cooperate with the investigation?

[Malcolm McLeod]

...
I'm a grown man. .... Why on earth would I sue him, if I got hurt?



Are you telling me that BCBS will perform an investigation, and THEY will look into suing my neighbor?
Even if I refuse to cooperate with the investigation?

It is not so much about you, or what you would do. We live in a drive thru world where everyone gets to 'win the lottery' - or so many imagine - and a WC claim is gold to some. Personal responsibility, no matter how admirable, is dying.

And yes, your insurer might sue your neighbor - - if not for your benefit, then to reduce the shared cost burden on their other customers.

"Whaaat a country!!" - Yakov Smirnoff.

[dirk martin]

Wow.
And so the reason I don't get sued when an Amish gentleman gets injured in my shop, has nothing to do do with his attitude towards responsibility, but everything to do with the fact that he doesn't carry insurance !!

This is opening my eyes.
I've also found out, that when an Amish person comes into my local hospital for treatment of any sort, because the hospital knows the Amish don't carry insurance, they have an "agreement" with them, to perform care at a drastically reduced cost.

[Malcolm McLeod]

I'm not disagreeing with you, but merely lamenting. And not many Amish noticeable around here, so can't speak to their habits and practices.

As for non-insured medical treatment, try it. You'll be amazed. Stories abound of docs who'll settle for 30 cents on the dollar to avoid insurance paperwork. I've a relative who works in a doctor's office, and 60% of the staff is clerical - just to handle the insurance claims and related paperwork.

3-4 years ago, FIL went in for minor (something?). 15 minutes later :: FIL "How much?"; Dr "$1395"; FIL "Can I just pay cash?; Dr "Oh sure, how's $300?" (Not the above doc.)

Look at cosmetic procedures. 99% are not covered by insurance, so docs have made huge strides to reduce costs, both out-of-pocket and patient's down-time. The free market at work beautifully (pun intended).

...What health care crisis? And with that, I'll pull out of this 'TOS dive'.:)

I wish you smooth sailing with your WC process.

[Mike Jungers]

Just to expand a little on my last post, I looked at a job we just finished and crunched some numbers. The total price was $21,344 for the job, total labor including employer taxes and workman's comp was $7,898, and since I exempted myself from workman's comp coverage the total I paid AP Intego to cover my guy was $370. I get what your saying about fairness and ethics, but I wanted to show just how little money it takes to CYA.

Paying everyone as a subcontractor will not eliminate risk for you and can create a whole can of worms if you're ever audited, have quality problems, schedule problems, and on and on and on. There's plenty of money to be made working with wood and I gently suggest spending a little on an accountant about adding employees or subs and take their advice.

Mike

[dirk martin]

Really appreciate the discussion, Malcolm.
I'm having a lot of ah-ha moments.

I understand the need for insurance. Especially health insurance. I'd never dream of going without it, and I've even gone as far as to personally cover family members that don't have it. But, based on this discussion....the Amish are really a work force I desire to hire. They have both the proven attitude of taking responsibility for their actions, and they don't carry health insurance. That's a hard combination to find, but it appears both are needed in order to drastically reduce your chance of ending up in court, when all I'm trying to do is make a bunch of bird houses.

[Leo Graywacz]

Ohhhhhh.
You mean it goes like this?

I go visit my neighbor.
I ask if I can use his tablesaw.
It's a little dark in his shop, but I only need to make 1 cut.
I'm not paying attention while making the cut, and run the blade into my hand.
I rush to the hospital, and Blue Cross Blue Shield is my health ins. carrier, and I file the claim with them, and they cover my injury.

Are you telling me that BCBS will perform an investigation, and THEY will look into suing my neighbor?
Even if I refuse to cooperate with the investigation?

WC is for businesses. Not your neighbor with a TS in his basement.

[dirk martin]

How is "business" defined?
If I'm selling my bird houses on eBay, am I a business?

[dirk martin]

I see your point, tho.
If I hire someone to produce a product I'm selling, in my shop, I need WC insurance.

If my neighbor kid stops over, asking for some work, to make money to go to the movies, and I have him spread mulch....and then he runs the pitchfork thru his foot....I should have umbrella home owners insurance.

I think I got that right....

[Leo Graywacz]

How is "business" defined?
If I'm selling my bird houses on eBay, am I a business?

Does the state know you exist and do you pay taxes?

[David Helm]

Looking at it from a tax situation, employees have to have taxes withheld and require end of year statements. You also get to pay half of their FICA taxes. Independent contractors have to be given 1099's at the end of the year showing their earnings from you. You also have to file. Either way, from a book keeping standpoint you have extra work and extra paying.

[dirk martin]

From a bookkeeping point, and from an insurance point, employees seem like a lot more work and liability, than using Independent Contractors.
Issue a 1099, along with a 1096... Boom...done.

And, Leo...."Yes", to both.

[Van Huskey]

It is not so much about you, or what you would do. We live in a drive thru world where everyone gets to 'win the lottery' - or so many imagine - and a WC claim is gold to some. Personal responsibility, no matter how admirable, is dying.

And yes, your insurer might sue your neighbor - - if not for your benefit, then to reduce the shared cost burden on their other customers.

"Whaaat a country!!" - Yakov Smirnoff.

Keep in mind personal responsibility is a two edge sword, though in modern parlance it is often meant only to cut one way.

Again comp is designed to take fault out of the equation, save some situations that state by state have been codified as an affirmative defense such as intoxication of the worker, that's why a blood draw is standard upon arrival of a workplace injury to the initial medical provider.

It seems comp is being viewed as a one way street only for the benefit of the worker but it benefits the employer as well by removing the chance for a worker to sue for the negligence of the employer. It mitigates liability and allows for much more manageable costs. Without comp employers would have much more exposure.

On to the OP. Honestly, there is a lot of misinformation in the thread regarding who can sue whom in all these different hypotheticals, or more accurately who has the chance of recovery if they do sue but it is so diverse I don't feel like trying to deal with each one and state law covers most negligence cases so it leaves possibly 50 different answers plus the basic common law and Napoleonic Code versions. In general insurance companies can't sue "for you" the have no standing in most situations but they do have subrogation rights and you may have a contractual obligation to help them recover their losses if someone else is at fault.

The OP should also check the WC laws in the state he plans to operate in, some states don't require WC for very small operations with say 1-3 employees, this is more prevalent in the South East though, many states require comp even for 1 part time worker but will all have pay thresholds usually by quarter but it is fairly low, usually in the 500-1000 bucks in a quarter area.

If you do hire subs makes sure they have comp or investigate any chance of you having exposure, if they work in their shops and don't have any common jobsite with you it is unlikely BUT depends on the local laws.

The Amish is somewhat of a red herring in that they are essentially a separate workforce that operate under a different set of "rules" and they basically self insure through their community and often have programs like the SBA which exempts them from WC. That said I know of no state that exempts a non-Amish employer who employees Amish workers from carrying comp on them so unless they are independent contractors (meet the common law tests for the IRS along with any state specific tests) a business would probably have to treat them as employees.

I get it, any business expense sux to have to lay out, I am a small business owner and have paid for comp insurance for over 20 years.

[Van Huskey]

Looking at it from a tax situation, employees have to have taxes withheld and require end of year statements. You also get to pay half of their FICA taxes. Independent contractors have to be given 1099's at the end of the year showing their earnings from you. You also have to file. Either way, from a book keeping standpoint you have extra work and extra paying.

I would bet more than 50% of INDIVIDUALS hires as independent contractors in the US would fail to meet either the IRS or state tests. In this case many employers are paying more money than they would for an employee and have liability exposure and serious tax ramifications lurking in the shadows.

[roger wiegand]

As someone who ran several small companies I grew to despise WC. We provided excellent health coverage, disability coverage etc which was great until someone got hut at work (only happened about three times over 20+ years). Then they were thrown into a bureaucratic morass of really lousy coverage, high deductibles, and unbelievable paperwork. I've never really understood why someone with a good health care policy should get dumped into the terrible WC system just because they twisted their ankle at work rather than home. I would cheerfully have paid a higher BCBS premium to cover those rare injuries at work.

[Van Huskey]

As someone who ran several small companies I grew to despise WC. We provided excellent health coverage, disability coverage etc which was great until someone got hut at work (only happened about three times over 20+ years). Then they were thrown into a bureaucratic morass of really lousy coverage, high deductibles, and unbelievable paperwork. I've never really understood why someone with a good health care policy should get dumped into the terrible WC system just because they twisted their ankle at work rather than home. I would cheerfully have paid a higher BCBS premium to cover those rare injuries at work.

That is a valid point on good health insurance, some states allow more freedom than others in choosing doctors and using health insurance as the primary payer there are some tricks for a willing employer to help this happen... The employee would have to at least be evaluated at MMI (maximum medical improvement) by a Comp chosen Dr to determine any permanent impairment/disability (this gets complicated since some states use schedules for all impairments, some leave out the spine, and there are multiple ways to access when the injured part is not scheduled).

There should be no deductible issues with comp, it should be 100% covered care with no employee payments.

The disability insurance coverage should not be impacted although most have subrogation rights. If a private or employer provided disability plan has a higher payout than comp then the disability plan normally is contractually obligated to pay the difference, in the case of a denied claim they pay full benefits but are reimbursed by the comp carrier if the claim is subsequently accepted. There are some disability policies with no subrogation rights but they are rare. SSD (Social Security Disability) also dovetails into the how issue of payment and subrogation if the employee is totally disabled and on occasion SSI could be involved if the worker had not worked enough to qualify for SSD.

I do agree the interaction of health insurance and workers comp could be much better for both the employer and employee.

[dirk martin]

I cannot thank you all enough for all of this information.
I will impact me greatly, as I move forward.