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Bill K
06-20-2001, 12:56 AM
I presently have no employees, but I must hire a part-timer in order to expand. Does it make sense to start a whole payroll/workers comp thing for one part-time employee, or should I pay him as a self-employed subcontractor, sending a 1099 at year end?

What about subbing to a minor? Should I ask his parents for a liability waiver? My insurance agent told me a workers comp policy would run at least $700, which, to me, is too much for a kid working part-time during the summer.

Your suggestions are appreciated.

cclllc
06-20-2001, 01:10 AM
I'm in the same boat as you.I have some partimers that I use as subs but I really could use a fulltimer at times.

lawnboy82
06-20-2001, 01:27 AM
ok. you should check with your state laws about this. in jersey you can have up to 4 employees before you need comp on them. and i dont think you need comp for subs either in jersey. that is what i heard from one source though. in new york. 1 employee = 1 workers comp policy. 1 sub = 1 workers comp policy. 1 employee = 1 W2 form, 1 sub contractor = 1 certificate of insurace that must be presented to you. as well as 1 workers comp certificate that you must take out, because you have a sub working for you. so any way you look at it you are gettin a workers comp policy. now if the kid wants to go and shell out money for his own insurance and everything then that is great. but i dont think anybody who is 16+ is gonna want to shell out at least 800 bucks a year for insurance so he or she can work for you.

Richard Martin
06-20-2001, 03:55 AM
Also be carefull about claiming subs to the IRS. Generally you can only claim them as a sub if they do not work under your direct supervision and if they use their own tools. If they get hurt while using your tools you are screwed if you don't have workers comp on them.

CMerLand
06-20-2001, 10:35 AM
Lawnboy/Bill K,

Im in New Jersey and have never heard that you need 4 employees to have workers comp full or part time. (Maybe its changed but I doubt it). Once you hire an employee you need workers compensation policy to cover that employee.

Secondly, if you are directing the work and how its being done using your tools then they are employees not sub-contractors. You may get away with it but when the IRS comes calling you not only dont have a paddle you dont even have the canoe. A fine and back taxes will have to be paid and your insurance company can also then come in and audit you requiring you to pay the insurance after the fact on their earnings.

Lastly, minors cannot operate equipment under the age of 18. Have a minor get hurt while working on your equipment and your business will go away very fast.

Insurance is a business expense, deal with it, shop the policy, charge your clients accordingly and protect your assets. Seven hundred dollars for a policy will barely cover one visit to the emergency room for a minor cut requiring stitches. Have an employee get seriously hurt and you'll never own another thing in your life after your bankruptcy.

CMerLand

parkwest
06-20-2001, 12:15 PM
I'll say it again, workmens comp is for the employers benefit. If your employee gets hurt on the job he can't sue you but only collect what WC gives him.

smburgess
06-20-2001, 05:18 PM
parkwest...

They can sue you if they want. AND they WILL WIN if you were at fault, for instance; employee cuts hand on mower blade because safety system that is suppose to turn blades off when you let go of the handle is broken or has been disconnected; employee lose's eye when weedeating from rock, and you didn't provide safety glasses. There's ten ways to Sunday it could be your fault, that's why it's good to have Liability Insurance. Workman's Comp will take care of their doctor's bills and their paycheck, but if they think it happened because of YOU, watch out! That's one good thing about being incorporated as a business, they can sue the business (you may lose the mowers), but not you personally (you keep your house).

SemiPro
06-20-2001, 05:35 PM
One thing to be careful of. There is a thing called "piercing the corporate veil." It is basically a legal attack where the lawyer tries to find instances where you didn't separate your business and personal dealings so you lose the protection of having a company. One example would be if you had a corporation and didn't keep minutes of your board meetings (even if it is just you). I have always been under the impression that if you have a wholly owned company and somebody wants your house that they will get it (except in Florida...that's why OJ is down there).

jaclawn
06-20-2001, 07:50 PM
One very easy way for small operators to compat the workers compensation/payroll issue is to run your workers through an employee leasing agency.

These companies will employ the worker, and then lease that worker to you. They handle all workers compensation issues, as well as payroll issues. MAny can also offer fringe benefits as well.

They will generally use a mutiplier to figure the amount that the labor will cost you. Ie. if you pay your workers $12 per hour, it will be billed to you at $17 per hour.

This route is generally more expensive than having a stand alone payroll service, and a seperate workers compensation policy, but may be a good alternitive for some smaller companies that want to stay legit.

Ssouth
06-20-2001, 08:41 PM
Bill K,

In Alabama it is not required by law to have workmans comp. until you hire you fifth employee. I only have one full timer and two to three part timers and I pay workmans comp. on all of them. The company I have it through is Associated Insurance Administrators. I pay monthly, based on a percentage of employees wages. I take the sum of all gross wages and multiply by .0571 and send a check to them for this amount. It's simple and I think it's a must if you have any full timers.

Likestomow
06-20-2001, 10:23 PM
By law you may not be required to carry WC, but that in no way separates you from the liability that employee is to you. If he should get hurt, you may not be required to have insurance, but you will still face the financial liability.

I called a local temp agency last week and found out that they would do my payroll and include WC for 30% of the wage I pay. But check around because I found it as high

Bill K
06-20-2001, 10:25 PM
Thanks for all the replies.

And thanks to Ssouth for the detailed low-down. I realize I'm not required to have workers comp on my part-timer, but I have the same responsibility to the employee regardless of insurance coverage. Concerning the calculation of premium based on percentage of payroll, is there a minimum premium? My payroll for one guy two or three days a weeks wouldn't add up to much as a percentage.

Thanks again.