Category Business Insurance News

Can making a mistake in hiring or firing an employee cost you money? Your business? Your personal possessions?

What do you think in this litigious society?

You may be expecting an insurance agency to recommend getting Employment Practices Liability Insurance (EPLI) and it’s not a bad idea, but how about avoiding the need for it as much as possible in the first place?

Is it possible to know the right way to do everything with employees? Possible, but easy? No. It would certainly require staying on top of all the latest laws, practices and codes. Sounds like a lot of research to us.

Wouldn’t it be easier to have it be Somebody Else’s Problem?

Entering in to PEO relationship may be an easier (and safer) solution. After all, it is their job to handle all the employee issues related to employment. In most cases their EPLI policy offers you, the employer, some coverage as well.

Here is a brief story from one of our clients:

“A few years ago we had an employee who was not performing satisfactorily. We didn’t know what to do. She was very well liked and a personal friend of ours. We tried to talk to her but she told us what ‘we wanted to hear’ and still failed to do her job satisfactorily.

We decided to call our PEO. After a very relaxing call we asked ourselves, ‘Why didn’t we do this before?’ After all, they are professionals aren’t they?

They handled it very well. They called our employee and asked if she knew what her job duties were. She listed them fairly accurately. They asked her if she could complete those tasks in the next two weeks. She said yes. They scheduled a phone meeting at the end of the two weeks. They went down the list with her and asked her if she had completed the tasks. Not surprisingly, she hadn’t completed more than a couple. They asked her ‘What should we do?’ She said ‘I guess I shouldn’t be at this job’ and they offered her a chance to resign rather than be terminated for cause. She took it.

When she handed in her resignation to us she told us that the PEO did a great job and she apologized for wasting our time. We took her out for a farewell lunch and she told us she already had a new position lined up. In fact, she entered a new career that suits her better and we are still friends. FOrgive us for stealing someone else’s tag line but:

‘That was easy’

Thanks to PEO Pros for putting us with such a Professional Employer Organization.”

If you want to have less stress and a more comfortable relationship with your employees, consider asking us to match you with the right PEO.

At PEO Pros, we are your professional PEO matchmakers. Use the contact form below for more information.

When is a worker an employee?
The IRS and state tax authorities are targeting the workforce that is incorrectly being classified as “1099 contractors” when in fact they are employees.

Why Are They Cracking Down?
The loss to tax authorities by treating legitimate employees as 1099 contractors is substantial. The employer is avoiding withholdings for workers’ comp premium, income tax, social security and Medicare. But the big reason?

Unemployment taxes.

This has become a serious issue not only on a state level, but also federal. Many states have depleted their “re-employment” funds and are relying on federal loans to pay benefits. Several states are behind in their loans and have seen their federal unemployment tax rate increase. Florida, for example, is three years behind in their loan payments and the rate has been increased from 0.8% to 1.7%. (The current federal procedure is to increase the rate 0.3% every year the payments are not made.)

So the employers who are incorrectly paying “employees under 1099” face serious fines, interest, back taxes and penalties.

In the following video, Remax of Avalon Park interviewed agent John Will Tenney to discuss the question:
When is a Worker a W-2 Employee vs. a 1099 Contractor?

Employers should be wary.  Under a recent initiative from the White House, the IRS is taking a dim view of incorrectly classified employees.

For the record, there is no such thing as a “1099 Employee.”  It’s W-2 employee or independent contractor.

So How Do You Know?
The State of Florida uses a list of questions which can be described as “enigmatic” at best:

A “Yes” answer for the following questions indicates that the worker is an employee:
1. Does the business provide instructions to the worker about when, where and how he or she is to perform the work?
2. Does the business provide training to the worker?
3. Are the services provided by the worker integrated into the business’ operations?
4. Must the services be rendered personally by the worker?
5. Does the business hire, supervise and pay assistants to the worker?
6. Is there a continuing relationship between the business and the worker?
7. Does the business set the work hours and schedule?
8. Does the worker devote substantially full time to the work of the business?
9. Is the work performed on the business’ premises?
10. Is the worker required to perform the services in an order or sequence set by the business?
11. Is the worker required to submit oral or written reports to the business?
12. Is the worker paid by the hour, week or month?
13. Does the business have the right to discharge the worker at will?
14. Can the worker terminate his or her relationship with the business any time he or she wishes without incurring liability to the business?
15. Does the business pay the traveling expenses of the worker?

A “Yes” answer for the following questions indicates that the worker is an Independent Contractor:
16. Does the worker furnish significant tools, materials and equipment?
17. Does the worker have a significant investment in the facilities?
18. Can the worker realize a profit or loss as a result of his or her services?
19. Does the worker provide services for more than one firm at a time?
20. Does the worker make his or her services available to the general public?

Some of the questions make sense while others have employers scratching their head and saying “huh?”

Where Can I Get Answers?
We strongly suggest consulting an HR expert or even your CPA.  If you can’t get answers there you can always contact us at PEO Pros – 800.788.8343

Why is pay as you go workers’ comp insurance the right choice for so many businesses these days?

What is Pay as you Go?
In this video clip, CEO John Will Tenney was interviewed by a local real estate office and answers a few questions about Pay as you Go Payroll and Taxes, as well as Pay as you Go Workers’ Comp. Both of these business options can help reduce costly audits and large bills at the end of a fiscal quarter, or the fiscal year.

A big thank you to Rick Aguirre of Remax Realty of Avalon Park for his help with the video.

Pay as you Go for Workers’ Comp
A “standard” workers’ comp policy comes with some “baggage” that many business owners would like to avoid. Not only are there extra fees for a “standard” policy and a possibly expensive audit every year, there are also some added risks. Why else are so many employers now looking at alternative methods? In today’s economy and business environment it pays to be flexible and innovative.

You may be asking what kind of baggage there is. Have you ever asked these questions?

• Who wants to pay a large premium deposit?
• What is this “expense constant” thing they charge?
• Why is it an estimate?
• Why is there an annual audit that usually ends up costing the business owner more money?
• Why is the timing on the big payment always so bad?
• Why are they telling me I am “mis-coded”?

Does any of this sound familiar in your business? How about these?

• Have you ever wondered why they can’t just take the comp premium at the same time you do payroll?
• Did you even know there are “Pay as you Go” workers’ comp insurance programs available?
• Is the only reason you are NOT doing pay as you go because you think it gives up control of your money?
• What is Pay as you go workers’ comp?”

All good questions. Here are some basic answers. (Please contact us to get more answers.)

Workers’ Comp premium is figured as a percentage of payroll for each employee in each “class code.” A “class code” is based upon the job description of the employee. For example, clerical employees and roofers have a different class code and of course a completely different rate of premium. “Mis-coding” is when the people are actually working at, or have different duties than those described in the class code.

PEO Pros functions both as a licensed insurance agency and employer consultants to assist employers in this area. Usually this involves placing the employer with a payroll service, or even a PEO. In many cases the payroll service is optional. Yes, you can still enjoy the transferred liability of a PEO without giving up your payroll.

The advantages to pay as you go services are many but here a few headaches that go away:

• Workers’ Comp annual audit is no longer needed
• Tax forms will be filed by the payroll service
• Large premium deposits go away
• Fewer problems predicting cost of employees
• Easier to add employees without incurring insurance increases
• Since reporting is more frequent (each payroll) changes in job description will likely result in less “mis-coding”

If any of this addresses a problem with your business or company, you may want to give us a call at 800.788.8343 or use the form below to contact us with your inquiry:

Our property and casualty agency has been creating strategic alliances with other large agencies to supply even more markets for business insurance, both to the traditional business owner and PEOs.

Agencies we work with include:
Stonehenge Insurance Services – PEO workers’ comp
Hourglass PC – PEO workers’ comp
Cypress Risk Management – large workers’ comp policies
Pontell Insurance – Business and personal lines
Petrucci Insurance – Business and personal lines
Corsair Insurance Agency – Doctor and Lawyer Professional Liability
Elite Insurance – Business and personal lines
I-surance, LLC – health insurance professionals

Has your workers’ comp coverage been denied or canceled? Not yet? Maybe it isn’t your turn just yet? If renewal time is coming up and you are worried, there are some steps you can take to make it easier.

What is involved in getting workers’ comp coverage? Understand that the insurance company is in the business of managing risks and they are taking a risk every time they add or renew a client. Your goal as a business owner then, along with your agent, is to convince the insurance company, or more specifically the underwriter, that you are a risk worth taking.

Here are the top 10 reasons why company owners either can’t get workers’ comp coverage or have it canceled or denied.

#10: Failure to be specific about what you do.
The ACORD form isn’t always enough. A detailed description of operations goes a long way in to convincing an underwriter that you are worth underwriting. It’s important to use percentages as well. For example, a lawn service company may want to say “80% residential and 20% commercial.” Make sure to list known excessive risk exposures too, such as how often you trim trees, or clean out gutters (involves getting on a roof.) Underwriters do not like surprises!

#9: Failure to maintain a safety program.
This is going to show up in your claims report sooner or later. A safety program not only has to be written, but enforced. Some roofers were seen working on a county school roof recently. They all had harnesses on but they were hooked to nothing. Doesn’t help much. Make sure your employees know the safety program and follow the rules.

#8: Spreading your company too thin.
So many companies try to do more than one thing. A famous person once said “If you try to be everything to everyone, you are going to end up being nothing to nobody.” Find your niche, stick to it, and don’t branch out in to other, riskier areas.

#7: “Shopping” your insurance around on a regular basis.
Sounds like a good business move doesn’t it? It’s not. Underwriters do not want to see your application year after year. Your company will get a reputation as a “policy jumper” and it will become more and more difficult to get a single company to take a chance on you.

#6: Underestimating your payroll to reduce premium.
Admittedly, a lot of times this is the fault of the agent. He or she underestimates your payroll to get you a lower quote. It has a downside, in that it makes you that much less attractive to the carrier. Report your payroll figures as accurately as possible. You plan on growing your company don’t you? It is OK to put that growth in your estimated payroll.

#5: Using too many subcontractors.
Lawyers have learned to “pierce the veil” and “climb the ladder” in subcontractor claims. If more than 20% of your business is handled by subs you are going to have a difficult time getting a traditional workers’ comp policy. Some companies have gone to strategic partner – referral arrangements, rather than subcontracting, because it separates the liability. Granted, you lose control of the cash flow but it is a lot easier to insure.

#4: Using “1099 employees”.
Let’s be clear, there is no such thing as a “1099 employee”. 1099s are reserved for independent contractors. Employees get W-2s. There is no middle ground. If you are paying employees as contractors, and therefore avoiding taxes and premium, sooner or later it will be revealed. The longer it takes to get caught, the more expensive it will be. Be very careful with this. Many states (and the IRS) are cracking down on this.

#3: Owning too many corporations or LLCs.
Workers’ compensation rules are different in different states, but all of them realize the potential cross-company liability of shared ownership companies. So much in fact, that there is a special form (ERM-14) that has a section dedicated to insuring companies with common ownership. While it may seem like a good idea to have multiple companies, most CPAs will tell you that the advantage is minimal compared with the extra paperwork and insurance difficulties. Check with your CPA of course, but it may be to your advantage to have different divisions within one company as opposed to having separate entities.

#2: Putting too much on your website.
Underwriters have the internet on their computers. They know how to use Google. Be assured they will comb every inch of your website to make sure you aren’t doing some high risk activity that you aren’t reporting. This has been the killing blow for several companies trying to get comp coverage. Which leads to the last, and most grievous error companies can commit:

#1: Lying to the insurance company (or agent).
Once you are caught lying on a form, or in an underwriting survey you are pretty much done for. We don’t know exactly how but we know that underwriters communicate with each other. We suspect they have a private Facebook group they tell stories in, and have good laughs about their latest “applicant.”

Never, ever, ever put false information on an insurance form. It’s in writing then and goes on your record. Don’t do it.

Why is it important to have a “rated carrier” for your workers’ comp coverage?

When does it make a difference?

Common questions and answers
How does a carrier get rated anyway?
In most cases it is done by evaluation by an independent company. In almost all cases in the United States today this company is AM Best, Inc. They evaluate several factors, such as diversity of business, financial stability, size of current book of business, amount of surplus on hand, value of outstanding claims, etc. An “A” rating indicates the highest rating, with “B” next and then “C” and so on. There are also “+” and “-” ratings in between (such as A++ all the way down.)

Does a rating make a difference in premium cost?
The correct answer is “It depends”. In certain states the premium is fixed, so only secondary factors come in to effect. Those secondary factors can be affected by rating, or more accurately by the characteristics used to compile that rating. Experienced carriers with large amounts of surplus have more flexibility in offering different plans, which can include discounts, deductibles and credits.

What is the danger of going with an unrated carrier?
he most obvious danger is the possible lack of financial stability in the carrier. In the last few years several unrated carriers have gotten in to financial difficulties and been placed in custodianship with the state they reside in. In this case, coverage may be revoked or terminated without sufficient notice to procure new coverage.

to be continued …

As if Obamacare isn’t bad enough, now small employers have to worry about the complex issue of rising unemployment insurance and tax rates. Formerly a rather simple calculation, things have happened in several states that make things complicated.

Just what an employer needs, another thing to worry about.

It is a justified headache to worry about, too. Failure to properly pay unemployment taxes in a timely and correct fashion can result in penalties, interest and fines that far exceed the original amount owed.

So why the confusion?
Many states are not paying back loans they have drawn from the federal unemployment fund per the original Federal Unemployment Account act. In fact 19 states and the US Virgin Islands currently have loan balances (see the chart below)
The Federal Unemployment Account (FUA) provides for a loan fund for state unemployment programs to ensure a continued flow of benefits during times of economic downturn. According to the U.S. Department of Labor, Employment and Training Administration, 19 states and the U.S. Virgin Islands currently have loan balances in their Trust Fund accounts.

As of January 3, 2013, the most recent balances of outstanding state loans from the FUA are:

State	Loan Balance	Began Borrowing
Arizona	$313,792,552.96	March 2010
Arkansas	$234,438,497.54	March 2009
California	$10,303,642,800.21	January 2009
Connecticut	$631,483,916.97	October 2009
Delaware	$76,412,258.04	March 2010
Florida	$630,816,097.02	August 2009
Georgia	$540,451,764.60	December 2009
Indiana	$1,767,543,083.93	December 2008
Kentucky	$837,664,856.16	January 2009
Missouri	$569,174,955.03	February 2009
Nevada	$685,308,839.53	October 2009
New Jersey	$957,235,892.50	March 2009
New York	$3,487,357,392.47	January 2009
North Carolina	$2,555,704,831.88	February 2009
Ohio	$1,739,094,085.65	January 2009
Rhode Island	$199,470,182.74	March 2009
South Carolina	$675,597,745.87	December 2008
Vermont	$57,731,860.63	March 2010
Virgin Islands	$54,743,040.87	August 2009
Wisconsin	$859,864,002.08	February 2009
Total	$27,177,528,656.68

Source: National Conference of State Legislatures

Why is This Raising our Rates?
Previously, the FUTA, or Federal Unemployment Tax Act, was assessed on the first $7,000 of each employees wages. That number may be raised to $8,00 or $8,500, (depending on who you talk to) largely because the states have not paid back their loans. There is also another negative effect from this. The Standard Federal Tax Rate is set at 6.0% (formerly 6.2% but the extra .2% was repealed in 2010). This is high, and would be an excessive burden on employers. To counter this, the federal government has been extending a discount of 5.4% to all those states that are not in arrears. That makes the national rate 0.6%. However, since states are now “raiding” the unemployment funds for various expenses, including but not limited to unemployment benefits, they find themselves unable to pay back the loans. The discount is being reduced by a rate of 0.3% per year to all those states in arrears.

In Florida for example, 2012 marked the second year in arrears, so the FUTA rate in Florida for 2012 is set to 1.2%. Since it does not appear likely that Florida will pay back the loans this year (or any year for that matter) we can expect the FUTA rate to keep increasing until it reaches the maximum of 6.0%.

Is it a tax or insurance?
Good question. Since it is required by ALL employers, does it make a difference? Employers mustpay it: to the state quarterly (usually) and to the Federal fund annually (form 940). The checks are written to the IRS or the state equivalent so for working purposes, call it a tax.

What can an employer do about it?
The most important thing to do about it is to stay on top of it, and make sure that there are enough funds to pay the correct amount of unemployment taxes at the end of the fiscal year, when filing the 940. This is best served by consulting with an expert in the field, or making it someone else’s problem.

Who are the experts?
CPAs are trained in tax laws. Most of them do an excellent job of making sure an employer is in compliance.

Wait, How Can an Employer Make it Someone Else’s Problem?
More and more employers are placing their employees in a co-employment situation with a PEO or Employee Leasing company that shares a large part of the responsibility of tax compliance. In this way they know they have an expert as a partner.

For more information on this subject please use the contact form below:

“What effect will Obamacare have on employers?”

It’s a question being asked by many small and medium sized business owners.

Recently overheard at a NAPEO convention: “If PEOs help business owners navigate through complexity, then we just got 2200 pages of complexity.”

“I don’t want any more employer problems” one business owner told us, “I’ve got enough headaches as it is. Now I have to follow all the guidelines in this 2200 page mess? Help me make all these problems go away …”

Using a custom PEO solution may not be the answer for all employers. Some do not have problems in any of these areas:

• Payroll and W-2 compliance
• Workers’ Compensation Insurance coverage
• Workplace safety procedures
• Drug free workplace procedures
• HR compliance and Homeland Security directives (I-9s)
• Unemployment Insurance Rates and issues
• “Re-employment” assistance
• Proper paperwork and documentation of disciplinary procedures
• Employee handbooks
• Proper application of the Affordable Health Care Act
• Proper benefits administration
• Employment Practices procedures and liability insurance
• Workplace signage and posters
• ADA compliance and required access
• Payroll deductions and compliance with garnishments
• Preventing employee tort situations
• Legal assistance in employee lawsuits

Common problems for employers? Maybe not. Possible? Yes. Keeping employers up at night? Definitely.

The new tax laws are aimed at small and medium sized business owners. They will carry the burden of funding our growing government. They do not have full-time lobbyists to prevent it. They have a target painted on their backs.

So how can an employer make all this “go away”?

In a Custom PEO Solution, the co-employment contract allows the PEO to become the employer of record and assume responsibility (and shared liability) for many of these concerns. Even in cases where complete liability is not assumed, isn’t it preferred to have a professional partner?

So if an employer wants to get rid of the headaches and worries that keep them from sleeping well, why not push off some of the liability and responsibility to a PEO?

Why not make it Somebody Else’s Problem?

Contact us using the form below if you think you would like to get rid of some of these problems.

Why would anyone expect to find all their payroll, workers’ comp insurance and HR answers from one PEO?

Would you buy a suit that didn’t fit? So why expect one PEO to do it all?

Many business owners are frustrated that they can’t find the right payroll, workers’ comp or PEO solution that matches their business. Some small businesses feel “swallowed up” in the machine of a large, national payroll company. Larger businesses find that a local PEO or payroll provider just doesn’t have the experience, service or access to products that they need. There is no “One Size Fits All” in business.

Do any of these comments sound familiar?

• “My PEO doesn’t offer the services I need”
• “Nice fancy PEO website, but I know I am paying for it”
• “All we need is workers’ comp and payroll, why are we paying for all this other stuff?
• “We keep getting denied for workers’ comp coverage”
• “We’re tired of calling a machine. We want to talk to a person!”
• “Our rep? You mean this month’s rep? We’ve had 6 different reps in 6 months”
• “I wish my insurance agent could help us with more than just insurance”

Perhaps you might need a Custom PEO Solution. We may be able to help. Tell us what is missing. Please feel free to contact us using the form below.

Is it worth it to go get a workers’ comp exemption from the state?

“Oh I don’t need comp, I’m exempt.” Have you heard this before?

Perhaps it is best to start with a few definitions to clear things up.

In Florida, Every employer is subject to the workers’ compensation act, regardless of how many employees they have¹. The statute more or less states that an employer shall cover the expenses and lost time of any employee hurt on the job.²

An exemption from outside coverage is available from several states when there are certain conditions met, such as 1 employee or less, all employees are also 25% or more owners, etc. This exemption must be applied for, paid for and filed with the state.³

There are no “automatic exemptions.” No one is “exempt” by default. The state must approve the exemption.

Once an employer has received such an exemption, he or she is making a promise to the state that they will pay for all workers’ compensation claims with their own funds. In a phrase, they are “self-insured.”

Some employers argue that being self-insured is enough, since a lawsuit will only proceed against an insurance company. Please be advised that lawyers are aware that most small business owners have other assets, such as homes, cars, retirement funds, children’s college funds, etc. Since some collect a percentage based on what is recovered, it can be profitable to pursue private assets.

Exemptions No Longer Being Honored
Add to this confusion that many larger contractors and municipalities are no longer accepting workers’ comp exemptions in lieu of an actual policy. They have found that lawyers have learned to pierce the veil of an exemption and perform what is known as “climbing the ladder” to the actual contractor in the case of a sub-contractor injury. Exemptions do not protect the contractors.

So is it worth the fee ($50 to $100 for “construction” business based on the state) and the application to get an exemption? A small business owner may consider getting comp coverage instead. There are many options available, including direct policies, “pay as you go” polices from payroll companies (even Paychex and ADP are offering this now) or even the more extensive liability coverage available from a PEO (formerly Employee Leasing Company).

It is true that initially it would appear that an exemption is indeed cheaper. But as is the case with all insurance, consider this: What if something happens? What if someone gets hurt? What if the OWNER gets hurt seriously? Loses a limb or loss of an organ? A properly written and paid workers’ compensation policy will pay for all medical expenses, legal fees and up to two-thirds of lost wages for as long as the injury is in effect.

Choices: It’s left up to the business owner.
The business owner has a decision to make, to run with an exemption or to have peace of mind through a somewhat more expensive workers’ comp policy.
If a small business owner wishes to know more about exemptions, their relative uses and other options available, please use the contact form below.

The authors of this article had assistance from the members of The PEO Message, a Facebook group used to communicate within the PEO and Workers’ Comp industry. Specifically, thanks go to Doug Lilak, Christopher Yarn, Chad Filley, and Jeffrey Rendel for their valued input.

Notes:
From Florida Statutes Chapter 440
¹ 440.03 Application.–Every employer and employee as defined in s. 440.02 shall be bound by the provisions of this chapter.

² 440.02 (16)(a) “Employer” means the state and all political subdivisions thereof, all public and quasi-public corporations therein, every person carrying on any employment, and the legal representative of a deceased person or the receiver or trustees of any person. “Employer” also includes employment agencies, employee leasing companies, and similar agents who provide employees to other persons. If the employer is a corporation, parties in actual control of the corporation, including, but not limited to, the president, officers who exercise broad corporate powers, directors, and all shareholders who directly or indirectly own a controlling interest in the corporation, are considered the employer for the purposes of ss. 440.105, 440.106, and 440.107.

³ 440.05