Small Business Man Woes

[Harritwo]

Not sure how anyone else can compete in todays business world. We were a property preservation company that had been in business for 3 years. We are a sole proprieter who until this year had been a family business. As we grew, we hired but had stayed under the magic number of 4 employees to avoid the Workers Compensation Insurance Requirement. Effective October 1, all the companies that we had a contract with required us to obtain Workers Comp Insurance. The Premium is more than my annual payroll, so after some research and serious soul searching, we (The Admiral and I) Decided we had no choice but to lock the doors effective December 15th.

With the corporations requiring things like Workers Comp, (A nice to have but not legally required) and other impositions, i fully understand now why there are not that many small businesses anymore.

Has anyone else been faced with this difficult decision recently? How did you handle it?

 

[bigdirty]

Re: Small Business Man Woes

.....Effective October 1, all the companies that we had a contract with required us to obtain Workers Comp Insurance.

I work for a small businessman, and I don't know all the ins and outs but I can tell you from talking to my employer, he has had difficult decisions to make from time to time, as the business has grown over the years... I've been with him since almost the start, and seen him over the years literally spend hundreds of thousands of dollars, (insurance premiums, new machinery, a property, a new building, more employees, etc) and never know if it will work out... but sometimes the only way to make it, is to chance it... and do a better job than anyone else could, even for twice the price...

A year ago my boss hired 2 new guys, and bought 3 NEW machines. The machines were somewhere around $300k, and the 2 new employees added quite a bit to payroll, AND insurance costs. Its borrowed money, but it was spend/borrow and 'grow' or shut the doors and give up... We have 10+ years working and doing jobs in this area to show for his way of thinking... one of my thoughts here is if all your contracts are requiring you to carry the added insurance costs, you should pass some of that cost on to them.. raise your rates/prices?

 

[sphelps]

Re: Small Business Man Woes

Could you get away with using a temp staffing service ? They should have there own insurance . As the owner I don,t think you are required to carry it on yourself .

 

[rbh]

Re: Small Business Man Woes

Up here compo is based on the job/company type and a percentage is taken per $100.
We pay $3.71 (3.71%) per $100 dollars our employees make, (communications field)

Loggers pay around 8%-12%+- as it is a high risk of injury profession.

 

[Eric 3.7LX Alpha 1]

Re: Small Business Man Woes

Same here in MA. I have 3-employees and DO have Comp. for them... It's mandatory here for me with even One employee. We are a plumbing company and the rate doesn't come close to being equal my annual payroll.

For Plumbing our current rate is 3.5 per $100.00... for $100,000.00 of total payroll the premium would be $3,500.00

For Clerical office employees the rate is .09 per $100.00 of total payroll.

these rates are with the following limits:

Bodily Injury by Accident - each accident $500,000
Bodily Injury by Disease - each employee $500,000
Bodily Injury by Disease - policy limit $500,000

I do also have an umbrella policy which gives me an additional 2,000,000.00 coverage for all of my policies, commercial auto, comp, and liability. I do not enjoy paying insurance, but I'm covered if anyone gets hurt or property gets damaged.

 

[PS94]

Re: Small Business Man Woes

Seems as if WC is cheaper out of state....could you maybe 'base' your business in a different state, with a PO box as your address, and use your current office as the secondary branch? Just tossin out ideas...

 

[64osby]

Re: Small Business Man Woes

Something does seem amiss. Work comp is based off a percentage of the gross wage. For 30 years we paid between 17 - 25% in WC Insurance. The owner can be excluded. For me it was much better to be excluded and buy a disability policy that cost less and provided better payout if something happened.

If the Corporations you contract with require it, all of the other subs / contractors will be carrying it also. I would believe that would increase everyone's cost. That type of expense is usually passed on to the customer, as they are requiring you to have coverage.

 

[southkogs]

Re: Small Business Man Woes

Osby's signature kinda' says it,

Despite the cost of Living, It's still a popular thing

If it's a compliance issue (federal or state), then everyone's gonna' have to deal with it. There's a way to work it in and stay competitive. As he says above, it may be a cost that gets passed on or if you can be competitive without maybe absorb it to help your bid status.

 

[Tim Frank]

Re: Small Business Man Woes

Say what? I think you need to do some shopping around because I've never seen a rate like what you are describing and I've worked (as a contractor) all over the country.

+1 ^^^

WC Quick Quote

OP may be out by a few decimal points.

 

[Harritwo]

Re: Small Business Man Woes

The main issue is two fold. The Banks all require us to carry Work Comp effective January 1, This requirement was told to me on 1 October. As a Very Small Business, (My Company is Myself (Owner), My Son (Technician), and another employee (Helper). My annual Payroll this year to date was less than $30,000.00 and as I have not carried work comp in the last three years, the major players have all declined. When I went and tried to go through a payroll service (7 to date) they all want to include me with a salary and my minimum payroll per week MUST be $400.00 wk/ employee. I dont have the volume to guarantee that plus there is a weekly admin fee, start-up fee, and then a "Pay as you go" WC Fee. My issue is i simply cannot guarantee the volume of work to meet the minimum payroll for the payroll services. AllState here in Orange Park returned the $40K a year WC Premium and i declined it. If it were just me and my son, we would file for an LLC and then file for an exemption. In Florida, a Sole Proprieter cannot file for an exemption.

 

[Harritwo]

Re: Small Business Man Woes

+1 ^^^

WC Quick Quote

OP may be out by a few decimal points.

i have contacted the link to see what they can do for me, their "Quick Quote" is very promising. Thanks

 

[Tim Frank]

Re: Small Business Man Woes

i have contacted the link to see what they can do for me, their "Quick Quote" is very promising. Thanks

That was a 10 second Google search; you should probably shop around as you would for anything else.

 

[southkogs]

Re: Small Business Man Woes

A SUGGESTION for ya' (used some of the ideas at our company - very helpful). Your primary problem sounds more like top-line sales. Might be time to trim the business sails a bit and beat the increased cost of doing business.

 

[avenger79]

Re: Small Business Man Woes

just wondering here, if OP doesn't want to pay WC, than one of your guys gets hurt on a customer's site you expect your guy to claim WC against the customer?

 

[Tim Frank]

Re: Small Business Man Woes

just wondering here, if OP doesn't want to pay WC, than one of your guys gets hurt on a customer's site you expect your guy to claim WC against the customer?

No, the discussion is about the total premium burden.

 

[avenger79]

Re: Small Business Man Woes

As we grew, we hired but had stayed under the magic number of 4 employees to avoid the Workers Compensation Insurance Requirement. With the corporations requiring things like Workers Comp, (A nice to have but not legally required) and other impositions, i fully understand now why there are not that many small businesses anymore.

Has anyone else been faced with this difficult decision recently? How did you handle it?

looks like he was to use his words "avoiding" workers comp ins

 

[Harritwo]

Re: Small Business Man Woes

Well as the story unfolds, it does end with a Happy Ending. We reorganized as an LLC, 4 employees or less and we are Workers Comp Exempt. For those of you not in the know, in the State of Florida as a Sole Proprieter, as long as YOU are the only employee you are exempt from workers comp insurance. When you have more than one employee, you now need to have workers comp insurance. If you as a Sole Prop have never had the said WC Insurance, You cannot go to a major carrier and purchase WC Ins if your payroll does not support the work for the employees. Since it is my sons, they are still in school, they work PART Time (20-30 hours a week) Mowing Grass, cleaning out trash from abandoned properties. WC Insurers look at total payroll vs total employees and I did not meet the minimum. It has NOTHING to do with hiding from anyone or anything, it is a financial decision. As an LLC with all the employees listed as owners in the state of Florida, We are WC Exempt up to and including 4 employees. Some of you said use a payroll service, same situation, you must have a payroll of $800.00 wk to get anyone willing to take the risk. I carry Liability and errors and omissions insurance and i choose to self insure for WC for my SONS. WE have excellent health care coverage, excellent auto, and business coverage. My whole post is about when you are trying to do what is right, to offer the benefits and coverages that the major players offer and simply cannot afford the premiums as a result of these "Price Guidelines" how does any small business compete? When my sons get out of school and can work full time, payroll and profit will increase as well as benefits. Simple economics yet the costs are very real.

 

[kfa4303]

Re: Small Business Man Woes

Sorry to hear about that Harritwo. It seems to be going around. Sounds like another case of the "vanishing middle". Companies, products, salaries, practically everything seems to be either very small, or insanely gigantic. There isn't much of a middle anything anymore. Of course, that's where most folks want/need to be, but you can't be somewhere that doesn't exist, and the days of realistically getting from one level to the next in a stepwise manner are over. Any chance you could stage a hostile take over of a local competitor, or print up some junk bonds like the Wall Street guys? They seem to be the only ones doing well these days.

 

[avenger79]

Re: Small Business Man Woes

Well as the story unfolds, it does end with a Happy Ending. We reorganized as an LLC, 4 employees or less and we are Workers Comp Exempt. For those of you not in the know, in the State of Florida as a Sole Proprieter, as long as YOU are the only employee you are exempt from workers comp insurance. When you have more than one employee, you now need to have workers comp insurance. If you as a Sole Prop have never had the said WC Insurance, You cannot go to a major carrier and purchase WC Ins if your payroll does not support the work for the employees. Since it is my sons, they are still in school, they work PART Time (20-30 hours a week) Mowing Grass, cleaning out trash from abandoned properties. WC Insurers look at total payroll vs total employees and I did not meet the minimum. It has NOTHING to do with hiding from anyone or anything, it is a financial decision. As an LLC with all the employees listed as owners in the state of Florida, We are WC Exempt up to and including 4 employees. Some of you said use a payroll service, same situation, you must have a payroll of $800.00 wk to get anyone willing to take the risk. I carry Liability and errors and omissions insurance and i choose to self insure for WC for my SONS. WE have excellent health care coverage, excellent auto, and business coverage. My whole post is about when you are trying to do what is right, to offer the benefits and coverages that the major players offer and simply cannot afford the premiums as a result of these "Price Guidelines" how does any small business compete? When my sons get out of school and can work full time, payroll and profit will increase as well as benefits. Simple economics yet the costs are very real.

little more info in this post. easier to understand what you're doing. we do the same on a house cleaning service we run. no "out of family" employees. so everyone is "insured" by our health coverage. plus now knowing what business you're in.

LLC is very common for small business, otherwise you risk everything you own if your business was ever sued for any reason.

sounds like it worked out well for you congrats.

 

[12vMan]

Re: Small Business Man Woes

W/C costs are outrageous in Ca., I think mostly from fraud. Ours is a small remodeling business with <10 employees. We pay close to 20%, and just had an audit yesterday. Since we estimate at the beginning of the year, we pay at the end if we grow.

Over the years we have been using subs more and more. I have even put former employees in business for themselves to do work for me just to stave off the costs of having them as an employee. Now I've got subs that were former employees.