Starting a business can be very daunting in getting all the state requirements done for filing, compliance, and the many other things that are involved. One of the things that typically get addressed last is workers comp. Business owners often come to me days before the business is to open wondering what they need for workers comp. Below are some answers to many of the questions I get including: Who needs to be covered, what do I do about sub contractors, and of course how much will it cost.
Any employee that is on the payroll as a w-2 employee will need to be covered unless they are direct family members or owners. In these cases, they are not required to be covered and can be exempt.
If subcontractors are used then they should have their own workers comp policy. This is very common in the construction and trades industries, as workers comp can be very expensive for the higher risk classifications. The sub contractor can purchase what is called a “ghost policy” where the person who holds the policy exempts themselves. Typically this will run between $500 and $1,000 a year. This is much less than if the business owner paid for it by having them on the payroll. But remember if you sub out work you must make sure they have their own policy. You will need to verify this by asking for a certificate showing they have coverage to keep your business from being liable if there is an injury.
Now for the most important question of all, is how much will this cost? The rate will always depend on two things; the payroll and the classification. The riskier the classification, the higher the rate. The highest types are normally the construction trades such as roofing or something along those lines. The least expensive are clerical types of positions. And of course the higher the payroll, the higher the risk because more work is being done.
If you have any questions about this please email me at firstname.lastname@example.org