Website design By BotEap.comIf a business has employees, it must purchase a workers’ compensation insurance policy. In New York State, if the employees are also company officers, two officers can choose to be excluded from the policy.

Website design By BotEap.comThe workers’ compensation policy can be obtained directly from the New York State Insurance Fund, or with the help of an insurance agent, through private insurers. Workers’ compensation insurance covers wage replacement and medical benefits for employees who could be injured on the job in exchange for the employee giving up their right to sue the employer. The cost of this insurance depends on the classification code of a particular occupation, for example, the cost of insurance for a clerical employee is much less than that of a construction worker. The more dangerous the occupation, the more expensive the insurance, as workplace accidents can potentially be more serious. Depending on the type of business and the occupations covered, workers’ compensation insurance can be very expensive. For this reason, many companies try to circumvent the system and this can lead to its closure.

Website design By BotEap.comThe main types of fraud committed by companies to keep the cost of workers’ compensation low are as follows:

Website design By BotEap.com1. Insufficient payroll. An employer reports that workers are paid less than they are actually paid to reduce their premiums.

Website design By BotEap.com2. Inflate the experience. An employer claims that workers have more experience than they actually have to make them appear less risky and therefore less expensive to cover.

Website design By BotEap.com3. Escape. An employer does not obtain workers’ compensation for its employees when required by law. Workers are often misled into thinking they are covered when they are not.

Website design By BotEap.com4. Misclassification of employees in a lower classification code.

Website design By BotEap.com5. Pay workers off the books or as independent contractors

Website design By BotEap.comThe penalties for not having workers’ compensation insurance are enormous.

Website design By BotEap.comFailure to insure coverage for five or fewer employees within a 12-month period is a misdemeanor punishable by a fine of not less than $ 1,000 and not more than $ 5,000. More than five employees within a 12-month period is a class E felony punishable by a fine of not less than $ 5,000 and not more than $ 50,000 and is in addition to any other penalty provided by law. Additionally, penalties increase by $ 1,000 per day for each additional day without coverage.

Website design By BotEap.comAnnually, most workers’ compensation policy holders go through an audit of their payroll, where auditors review not only the number of employees, but also their job functions. Also, all subcontractors are listed and reviewed to make sure they have their own policy; if not, a company can be assessed an additional 15-20% of the amount they paid to that subcontractor.

Website design By BotEap.comCurrently, the New York State Insurance Fund references payroll tax returns and compares business identification numbers to see if they have coverage. Otherwise, a preliminary penalty letter is sent to the company. If this letter is not heeded, the penalties progressively increase.

Website design By BotEap.comThis is another topic that should be discussed with an experienced accountant before starting or expanding your business. Failure to comply can carry severe penalties that can bankrupt a business.