¶ Workers Compensation for Painting Business Owners
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This is Daniel , the founder of Bookkeeping for Painters , and today I'm here with Angie Gordon . She is one of the advisors here at Bookkeeping for Painters and formerly she was a risk management consultant at a couple different workers' comp carriers .
So , having her on today to discuss workers' compensation because this topic is pretty important for any business owner , because more than likely you're going to have to run into this topic at some point in your business career so I have Angie on . How are you doing , Angie ?
Good , how's it going , daniel ?
Going well , going well . I appreciate you coming on .
Yeah .
And yeah . So I think the first question we can launch into is , if you get the listeners like just a basic , what is workers' compensation ?
Sure . So workers' comp is insurance coverage that provides coverage to the employee for medical bills , lost wages and any other expenses that are incurred as a result of an injury , so like travel to and from medical appointments , things like that .
So it's a coverage that the employer pays for , but it provides benefits to the employee , so it doesn't actually pay anything out to the employer .
It doesn't cover things like lost productivity or hiring or replacement worker or overtime that your other employees may need to pay or may need to work or anything like that , and so , with very few exceptions , it's considered the exclusive remedy available for a workplace injury , and what that means is that it's no fault coverage .
So the employee is covered for pretty much any injury that is related to their job , directly related to the job , and since it's the exclusive remedy , that means that the employee cannot sue their employer for damages or anything like that . Basically , it's a set coverage that is administered by the state .
Okay , now is this . This worker's compensation is just . Is this just for employees or does ? If you're hiring subcontractors , you need this as well .
So you should not be providing coverage for your subcontractors . Typically , your subcontractors should have their own coverage . They need to have their own policy . However , you can unintentionally cover subcontractors If you don't get certificates of insurance and you don't have all your ducks in a row .
There are cases where you can unintentionally cover subcontractors , so that's why it's really important that you're getting all of the documents from your subcontractors when you're hiring them on .
Okay . So basically , if you have subcontractors and they're not covered on their own policy , you might have to cover them .
Correct . Yeah , that's the thing that sometimes comes to light during . We'll talk about audits a little later , but sometimes that comes to light during workers comp audits . If you don't have that proper paperwork in place , then you may have to pay premium for your subcontractors .
Okay , all right . So if I'm a new painting business owner , and what kind of costs am I looking at for workers compensation ?
So that's going to vary significantly . Like I said , workers Comp is a state-run program so there is no national board on Workers Comp . Every state has its own Workers Comp program and so in most states you're going to have a choice of insurers . So there are going to be multiple insurers that you can get insurance from .
There are four states and Alice says it's Ohio , wyoming , washington and North Dakota that are considered monopolistic states and that's because they don't allow anyone else to sell Workers Comp compensation insurance in their state . So their insurance all comes from a state-run fund . But everyone else can get coverage on the open market and it varies pretty widely .
Like I said , every state has their own rates and even kind of drilling down further than that . Every insurance carrier can file for variances to those rates and I mean just the base level premium varies anywhere from like a little over $2 in North Dakota to close to $15 in New York .
So I would say $5 to $6 is probably a good range , average range , and that $5 to $6 is per $100 of payroll . So for every $100 payroll that you have for your painters you're going to pay around $5 to $6 on average , and again , that varies widely for your Workers Comp coverage .
Okay . So if you have a painter that you're paying $25 an hour , that basically goes that $25 an hour goes into 104 times .
So if your rate is $6 per 100 , it's basically you can take your painter of $25 an hour , and if your Workers Comp is $6 per hour , you divide that by four , since 25 goes into 104 times , and so that would be $1.50 that you would add on to your $25 an hour . You pay your employee to get that Workers Comp burden Right .
All right , so that would be $150 plus the $25 . So your burden loaded burden would be $26.50 .
Yes , and that would be for , yeah , for painters and some of the things that kind of come into play I haven't talked about is so that that $5 to $6 is just for painters . So every industry , every job class , every job that someone has has a class code assigned to it .
So there are class codes basically give a job description of what the people in that class code do . So painters typically again , there's some variation , but typically painters fall into the 54-74 class code and so that doesn't doesn't matter if they're interior , exterior , commercial , they're , they're all in that 54-70 for class code painters .
So they have like $5 to $6 is a pretty moderate Workers Comp premium . But it's very likely that our clients may have some sales people on the role , they may have managers , they may have admins . Each of those roles have a different Workers Comp premium or Workers Comp rate .
So it's important that you are distinguishing your employees and your payroll between your administrative employees and your painting employees , because you don't want to pay the painters Workers Comp rate for your admin employees .
Right , yeah , I think that's a key point making sure in your , your payroll provider platform , whatever you're using for payroll , that you're everyone's properly classified , so you're not overpaying , like you said , for , like an admin person not paying Workers Comp rates for them to painting when they're actually sitting in an office .
Or it might be , maybe for a production manager . That might be another thing . A production manager is sitting in an office , he might be making phone calls and and coordinating for folks to be on the job site , but he's not actually on the job site potentially .
So making sure he's properly classified so you're not overpaying Workers Comp , so yeah , that's a good point .
You only want to pay that , that higher premium for the guys , for gals , that are actually out on the job site doing doing the work . That's kind of higher risk , so yeah .
Okay , cool , makes sense . Yeah . So this is understanding your numbers , super important in this regard , especially for developing your estimate . So understanding what your workers' comp rate is for your painters will help you dial in your labor rate when you're doing production rate , hopefully to generate your estimate .
So again you look at your workers' comp rate and it's going to be something like $6 out of $100 , $6 for workers' comp for every $100 in payroll or whatever it is . You take that and then kind of do that math that I just ran through divide your average painter rate into that $100 and get how much that additional workers' comp rate is .
So use the example of $6 for $100 in payroll . That would be $150 for a painter that makes $25 an hour . So just kind of nailing down that cost rate will make your estimates more precise . Okay , cool . So what are some of the things that folks can do about workers' compensation audit ?
Can you kind of go through , first of all , what is a workers' compensation audit ? Should we be scared and what can we do to prepare for something like that ?
So I think people here , I think business owners , hear the word audit and immediately flashing red light , panic starts to happen . But it's important to know that everyone who has workers' comp is audited every year in some form or fashion .
There are different kinds of work comp audits , but if you have a workers' comp policy you will be audited in some form or fashion every year . And to kind of give you a reason for that . So workers' comp you kind of talk a
¶ Workers' Comp and Handling Claims
little bit . Workers' comp is based on the actual payroll that you pay out to your employees and so when you get your workers' comp premium calculated at the beginning of the year that's an estimate you give them estimated payroll numbers and almost no one is going to give an exact dollar amount of how much their payroll is going to be for the policy year .
So when we get to the end of the policy year , the workers' comp carrier wants to figure out okay , if you told us this is how much payroll you were going to have for the year , how much did you actually have and in what categories did that payroll fall ? How many ? What did you pay out for painters ? What did you pay out for admin ?
How did that shake out . Did you have a really great year and you had much higher payroll than you anticipated ? Or was it a slower year and you didn't have you know , didn't have as much payroll as you anticipated ?
So , yeah , that's important to remember , and I've heard a lot of people say , oh , you never , there are never return , you never get a refund on your workers' comp policy . And , yeah , that's not true .
But you don't want a refund on your workers' comp policy because that means that your business probably shrunk , you probably did not grow as much as you anticipated and so your payroll was lower . But , yeah , I've absolutely seen refunds or return premium is what it's called at the end of the year .
But , yeah , we want to make sure that the carrier wants to make sure that you're paying an accurate amount .
What are some things for folks that have subcontractors being prepared for those audits . What are some things that they should kind of look at .
If you have subcontractors you want to have really have all of your debts in a row to make sure you're not paying premium for people who aren't your employees , who you didn't plan to pay premium for . So you should have their W-9s first of all before you ever pay them , and also you need to get their certificates of insurance for their workers' comp policy .
So really , before they ever step foot on your job site , you need to make sure that they have the statement of coverage for workers' comp . It's important .
It protects you in the long run , Because claims can be super expensive If you have some subcontractor that gets injured on your job site and they don't have coverage , that can really really hurt you in the long run .
Yeah , and that's something we've talked about in previous episodes Making sure you're getting your subcontractor W-9 , certificate of insurance , all those things before they get on the job site . So that's not only get those , but also file those away because you're going to need them again for your workers' comp audit .
So that will just make things a lot easier once that comes around .
Yeah , the key for audits is record keeping , just maintaining your records for the year . You want your own internal payroll records , but then all of the records for your subcontractors as well , and you want really , I would say , meticulous records of your employees .
As far as we talked before different class codes , you want to make sure your payroll records very clearly outline what employees were painters and what employees were not painters .
So Okay , great . Well , another thing that we might need to consider is when preventing accidents and then also what happens when someone actually does get hurt on the job site in handling that claim process . Do you have any tips for preventing accidents or handling claims ?
I do . So , yeah , that's actually what was kind of my bread and butter was coaching our clients in the past how to prevent accidents . So that's the one thing that's in your control . The one ball that's in your court is , as far as controlling your workers' comp premium , is controlling your accidents like making sure you don't have injuries on the job .
So making sure you have a really solid safety program and not just a written program . I've met with lots of contractors in the past that show me their safety program like in a binder on a shelf . That's not a safety program .
You have the minimum requirements that OSHA says you have to have , but as far as an actual functioning safety program , you want your employees to be trained , you want them to know safe work practices and , just as important , you want to make sure that they're actually doing that , that you don't have guys that are taking risks they shouldn't be taking .
As far as trades go , painting is not one of the higher risk trades , but there are still definitely opportunities for significant injuries . The biggest one is going to be falls , because you've got guys working on scaffolding and ladders , so that's the biggest probably needs to be .
The biggest focus of your safety program is fall prevention , especially if you're doing exterior painting from multiple story , from scaffolding , that's a higher hazard process there , so making sure you are doing everything right . Other injury types that we see pretty commonly in this industry are like sprains and strains .
So picking up heavy paint cans and equipment like that . And then another one that kind of seeks some of the radar that a lot of people don't think about is motor vehicle accidents , so like car wrecks driving between job sites . They don't tend to be super frequent , but those can be some of the costlier claim types or car accidents .
Yeah , that makes sense . So what should a business owner do when they do have someone actually fall off a ladder or get in a car crash while they're on the job ? What's their next step from there ?
So the important things are to report that claim as soon as possible and to document as many details as possible . So reporting it to your insurance carrier as soon as possible , even if the employee says I'm fine , I don't need to go to the doctor , I don't think I need medical treatment , it's important to report that claim to your carrier .
And if the employee doesn't go to the doctor and doesn't get any medical treatment , then that claim doesn't count against you . That doesn't go into any sort of calculation , but reporting it gets it on the radar of the insurance carrier and they're the experts , I mean they know how to manage claims .
So getting it on their radar early really helps them get a handle on managing the claim from the get-go so they can start . You know , if it's a claim that maybe you are a little skeptical about , then the insurance carrier can do an investigation . They're always going to do an investigation .
So getting them involved is very important and also documenting anything that you know , having a basically an injury report form that you ask kind of a detailed description of what happened from the employee that's injured and also asking anyone who may have witnessed it . So if there are any witnesses , getting kind of a detailed description of what happened .
That helps . It's kind of two-fold , it's discovers if there were any shady things going on and also helps you kind of recognize and identify any issues that you may need to like retrain your employees on of . You know , maybe he was kind of both in the pool trying to go up a ladder .
So you know , kind of identifying things like that can help prevent future accidents .
So one thing Sorry .
Sorry Go ahead . Yeah , so once it's reported it's kind of in the hands of insurance carrier . But it's important that you stay on top of that and stay in good communication with your carrier . Most of them are going to want to be your partner .
For the most part , insurance carrier doesn't want to pay out any more than they have to , but they also , you know , want to make sure that your employees are taken care of . So , staying in good communication with them , providing documentation that they need you know , if you have somebody that's going to be out for work , they may need wage statements .
They're going to want , you know , accident investigations that you may have so kind of keeping in good communication flow with them .
Yeah , and one of the things that she said that I think should be highlighted is reporting . You know , when somebody gets hurt , reporting it as soon as you find out about it to your insurance provider . That won't necessarily increase your premium .
So don't be afraid to report because you think , even if you think that the injury was not like a significant injury , that the person is going to actually need help . You know from a medical provider you should report it anyway because it's not if he doesn't end up going to seek medical , get medical attention .
You know that's not going to count against you if he doesn't get medical attention . So reporting it is not going to count against you necessarily if your employee doesn't seek help .
Okay . And on the other side of that coin , if you don't report it and like someone says , oh , you know , I think I pulled a muscle on my back , but I'm okay , if you don't report it and you don't do any kind of like investigation and ask him questions of , hey , what were you doing ? You know when you injured your back what happened ? No-transcript .
And a week later if he comes in and says , hey , my back's a bother , may I wanna go to a doctor , I mean , that's a week . A lot of things could have happened in a week . Did something happen outside of work ?
Also , we've kind of lost the chance to manage that claim from the get-go and especially there are some states that actually allow you to direct medical care . So there are some states where the employee can go to any medical facility that they want . But I live in Tennessee and we can . You can direct medical care in Tennessee .
You can give an injured employee a panel of three medical providers and say , okay , these are your three options , choose from them . So if you don't report that upfront , then it kind of gets . There are some issues with you .
Didn't provide them a proper medical panel and if they went to the emergency room over the weekend , things get a little hairy and basically it allows , it kind of removes the control factor from the insurance carrier if you aren't getting in front of the claim like from the get-go .
So so basically , it makes sense from the perspective of the business owner that they report , you know , as soon as something like that happens . Even if they don't think it's gonna turn out to be a significant thing , it's gonna protect them .
Yeah , a lot of . I know I'm sure a lot of our listeners are familiar with an experience mod or E-mod . If you've been in the game for a while and you've talked to your insurance agent , they've talked about your mod rate , which is kind of a comparison .
A mod rate kind of compares you to others in the industry as far as how you were performance from a workplace injury standpoint , with frequency and severity of injuries at the workplace . So yeah , report only claims . So claims that never actually turn into a claim do not go into that calculation at all . So don't be hesitant to report them , Don't be scared .
Okay awesome , all right . Well , I think we covered a lot of things when we talked about what workers comp is .
We talked about the cost of workers comp generally speaking for painting contractors and then talked about how we can incorporate the cost of workers comp into our labor estimate and then went through some ways , some tips on handling workers comp audit and then preventing accidents and handling claim for workers comp . So I'd love to hear from the listeners .
If you have any questions about workers comp , go ahead and go to Facebook , type in grow your painting business and request access to that group , that Facebook group . Ask your questions , anything you have on workers comp .
Maybe you don't quite understand your workers comp audit that's coming up , what's required there , or you're just curious about what kind of rates other folks have . Let us know your questions in that group . Happy to hear from you . Or if you have any requests for future episodes of the podcast , we'd love to hear your feedback .
And with that , I hope everyone has a great week and I'll see you next time .