Workers Compensation Insurance

[Zatol]

I ran into a guy today who has an experienced framing crew. They have liability insurance, but no worker's comp. I have heard of other builders somehow obtaining the workers comp for their subs and deducting the cost from their payment. Have any of you done this? If so, what does it entail?

They are good workers, but poor or disorganized businessmen. I'd like to give them a chance.

Any thoughts would be appreciated.

[giddonah]

This is a good question for www.tramcontractor.com

It's the more business oriented version of this site.

[Sparks]

I've never heard of that but usually around here you would use a sub, that sub would have his own insurance and you would not be required to provide your sub with anything but a 1099 form at the end of the year and whatever the payment agreement was. You wouldn't be required to provide a sub workers comp. insurance.

[Zatol]

I appreciate the response... I have found out how it works around here..

Basically, I take out the worker's comp. insurance based on my annual payroll, excluding myself. So.. while I will be paying this guy with a 1099, he will be covered under my worker's comp policy.. I will deduct from his fee the cost of the policy..

The rate for his trade, framing, is 18.67%.. I am paying him $21,000 so the premium for the policy would be about $3920.. My total cost for the job then is $24920.. Which is what I would have paid him if he had the insurance..

[grumpydasmurf]

WC laws vary from state to state. Here is how it works in my state. If those guys ARE employees the experienced carpenter is breaking the law. All employees must be covered by WC.

Now let's say each man on the crew is setup as a sub contractor or independant contractor. Well now there is the potential that the experienced carpenter is breaking some federal tax laws.

Either way here is a good rule of thumb: No WC = No work from me.

Remember WC rates are almost always based on payroll, meaning if the rate is 18.67% that doesn't mean the contractor pays 18.675 on the contract value, only the labor portion of the contract value. The labor portion could be anywhere from 20-60% of the contract value.