How can small contractors save money in this bad economy?

I would like to know what a small contractor with 2 or 3 employees can do to save some money on his Work Comp insurance. The rates are really high! Should he fire his employee's and hire them back as subs and make them get there own insurance? Should he just fire them and shut down? Just leave it like it is and not eat?





Please only serious answers.|||I would consider checking rates with other carriers. You will need to check rates for your entire account, i.e. your Commercial General Liability, Commercial Vehicle, etc. Most insurance companies will not write stand-alone Workers Compensation since it is usually not profitable. The commercial insurance market is currently very soft, i.e. companies want to write more insurance and rates are actually going down--competition for clients is fierce. You should be able to find a good company with lower rates. Of course if you have a bad claims history, all bets are off.





Check rates with your own agent first. Let him or her know that you are "shopping". Sometimes your agent can talk to their Underwriter and get a concession on your rates to keep you as a client. Then you should check with a couple of independent agents. Some companies for you to check--Travelers Insurance, Erie Insurance, CNA, The Hartford, etc.





In terms of firing your employees and re-hiring them as subs, I do not believe that would fly with IRS. IRS has very strict criteria for whom they consider an employee vs a sub-contractor. The major problem with this is they can come back and demand back employment taxes on people you paid as subs that they state should have been categorized as employees. Recently one of my clients had a $55,000 levy from IRS due to this exact situation. In my humble opinion I would not tangle with the Feds.





Worst case scenario is lay off one person or reduce hours but if the insurance cost is your only problem I hope you won't need to do that.





I hope this helps. Good Luck!|||Yes, employees on contract are definitely cheaper. That's why companies downsize. Of course, workers' comp has its own deeply SICK way of denying workers benefits (see the heads-up here http://www.bcdisabilities.com/bcdisforum鈥?/a> - even if you continue paying! The good news is that if independent contractors (as opposed to employees) are able to obtain their own insurance, they'll be able to deduct at least a portion of the payments from income as well as other business-related expenses. Sometimes, too, there is coverage via local provider (see http://www.pac.bluecross.ca/individual/b鈥?/a>





It's not nice to lay off (rather than fire for cause), then re-hire on contract, but I'll bet they'd rather have SOME work than no work because you gave it all to an insurance company that might not even pay them in many cases! (See an example here http://www.bcdisabilities.com/bcdisforum鈥?/a>|||the 1099 contractor idea might work...beats not eating or closing up shop.|||~~You have to be very careful using them under a 1099. There are strict limitations for how often you can use employees and consider them as "subs."





Your options are to probably lay them off, do as much work you can yourself, then use a temp agency for daily laborers. Then they pay the w.c., and you just use them when you need to.





This is what we have had to do (my husband is a contractor too). What he can't do he is subbing out to real "sub contractors," people who have their own business license and using temp services. It has saved us from going belly-up!~~|||YOUR AGENT should be answering this for you!!





But you don't get "off the hook" by calling employees subs, for those workers comp benefits.





Some states, there ARE things you can do - starting with safety committee credits, and reviewing your mod calculation worksheets. Other things, would include general risk assessment - maybe you want to drop that hot tar roofing from your jobs, altogether.





Bottom line - there's no "one size fits all" best way to handle it, it is HIGHLY individualized. If your agent can't help you, you probably need a new agent.