Workmans Comp- the company "requires" it.

Discussion in 'Ask An Owner Operator' started by xairx, Sep 10, 2019 at 7:26 PM.

  1. xairx

    xairx Light Load Member

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    I want to lease on to this one company that requires me to have workmans comp. If I had a driver, I get it- they should be covered. Personally... "I'm good". I can get the policy set up, that's not a problem. I'm just not willing to pay $400 a week for benefits that I will never receive even if I get hurt.

    Negotiating with the company is out of the question.

    Let's assume I pay myself $1,200 a week (steady). I can technically split it into two checks. I would pay workmans comp on my $400 paycheck, and no workmans comp on my $800 paycheck. That keeps me "in-line" with the IRS. It's an s corp, so I cant just pay myself $100 a week and take a distribution for the rest. This way the company sees i have workmans comp, the IRS is happy, and I'm not losing out on paying full price for a policy that i can technically use as toilet paper.

    What's wrong with my plan?

    Why am I being "cheap" you may ask? The chances of workmans comp paying out if I get hurt as an owner op are slim to none. Workmans comp is also not required for a business owner by law. Almost every single company you wanna lease on to requires it so they can cover their behind. I'm not in the business of paying for things that cover others, if not required by law.
     
  2. Long FLD

    Long FLD Road Train Member

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    Does it have to be true Workers Comp coverage? I have Occ/Acc coverage from OOIDA because the guy I run for wants us to have something on ourselves.
     
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  3. Tug Toy

    Tug Toy Road Train Member

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    Just like the mandatory “unemployment insurance” I have to pay every other week.
     
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  4. brian991219

    brian991219 Road Train Member

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    It will not fly, the worker comp will be audited at the end of each year and they will look at your total exposure for payroll not just the part you plan to pay insurance on. Further, they can adjust your WC rate to reflect an average salary for the driver job if they feel you are underpaying your driver (you in this case) or their activities. Salary must be reasonable for the tasks performed.

    I have had several WC audits at my shop when I had the towing business and they always were concerned about how much time each employee spent at a specific job task to be sure they were being assessed the correct rate for their exposure. They even required some documentation to prove my tow truck drivers spent more time in the shop as a mechanic ($2 on every $100) then as a driver ($8 on every $100). What was really odd, my tow truck drivers rate was $8 per hundred but my auto transport driver rate was $14 per hundred of payroll. Odd since tow truck drivers have much greater exposure with one being killed on average every 6 days in the US.

    If this company is New York based it is a requirement of New York law that all transportation sub-contractors have workers comp, and the state aggressively enforces it. I have some experience with this where New York based my worker comp exposure as a single truck owner operator with my own authority hauling for a New York based company (I was domiciled in PA and a PA based company) on a percentage of my gross, not what I claimed I paid myself. They assessed the company I was contracted to a WC premium based on a projected payroll that was 33.3% of my gross earnings to the truck. This was because New York did not like my PA based WC plan, it was missing a specific endorsement for NY state.
     
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  5. xairx

    xairx Light Load Member

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    That's what I have right now too. $120 a month. I can deal with that. Its cost of doing business. At $400 a week for workmans comp.... that's just money blown away.
     
  6. xairx

    xairx Light Load Member

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    It sure sucks. Were getting milked so people out there can go around and whine they cant find a job for 6 months. Surprisingly they always find one as soon as the benefits run out
     
  7. xairx

    xairx Light Load Member

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    Great information! Thank you!

    Well here is the thing... I have an s-corp and I plan on leasing on to the company in question. They pay my s-corp weekly for services performed by my s-corp, that's it. Payroll is on me. WC is on me. Taxes etc. Its the typical owner op scenario.

    My s-corp is based in NJ and the company I plan to lease onto is also based in NJ. NJ does not require owners of a small business to carry WC. So per the state law, I'm in the clear. When it comes to an audit. Did you mean an audit by the state or the company you were leased onto? The state can audit me at the end of the year and that's "fine". "Fine" because I cant say NO. If a company I lease onto wants to "audit me" they can go .......... (you get the idea). Audit? Goodbye! I'm not releasing my business info to a private corporation.

    Also, my second idea was to get workmans comp policy documents, show it to the company, let them verify, and cancel the said policy.

    I'm trying to avoid spending money on stupid useless crap. Monthly WC is higher than my truck payment... it's over $13k a year. Now if the rates were higher and we were all getting $5 a mile it would be the same story but at least the numbers would make better sense.

    I'm trying to make the numbers make sense and... WC is ripping a large portion of my profit.
     
  8. brian991219

    brian991219 Road Train Member

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    The audit is done by the workers comp insurance carrier, not the state or the company you plan to lease onto.

    I agree it is crazy to require WC on a 1 man independent since in most states thebowner of the company is prohibited from collecting on a WC claim. In your case a Occ Accident plan makes much more sense, too bad the motor carrier doesn't see it that way.

    For me I had to deal with the WC crap when I had the garage and fleet, no issue there, what ticked me off was needing it when I was a one truck company just because I was contracted to a NY based company.

    Wish I had a solution for your situation. Be careful if you chose to obtain the WC policy then cancel afterwards. The WC carrier will notify any certificate holders such as the company you are going to lease onto which may cause your lease to be canceled.
     
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  9. brian991219

    brian991219 Road Train Member

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    Also, shop around for the best WC rates. I don't know how many offer WC policies in NJ but can say here in PA there are over 300 insurance carriers offering PA workers comp insurance. I was able to find a significant difference in rates between them.

    All WC plans have a base formula that each state requires based on a occupation code but the individual insurance company can then adjust the experience modifier and other portions to get you a better premium per hundred of payroll.

    Lastly, WC is a unique animal in that your first year is kinda like paying on an honor system then when the come to do the payroll audit to set the rate for next year they can hit you with a premium adjustment for the year you just completed and demand immediate payment if they determine your payroll exposure was greater that what was reported. This happened to me one year and it was awful.
     
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  10. xairx

    xairx Light Load Member

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    You had exactly the same situation as me now when you were leased onto the company in NY.

    Great point on the last paragraph... If they notify them I'm out of the game and chances are they probably will.

    I gotta find a way around all this somehow. At the end of the day I can hit $6k a week but after everybody is done taking their cut I'm not left with much to hire a driver. How the hell do people grow in this industry is beyond me. I should have opened a gas station instead... 40 cent markup per gallon on diesel depending on the area.
     
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