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  1. #1
    SJP Guest

    Default 25% increase for WC in CA

    Today I received a letter from state fund informing me that my WC premiums are going to be increased a MINIMUM of 25% at policy renewal. I already pay 28% for workers paid over $22 ph and 58% for workers under $22ph and this is for residential interior carpentry work.....and we've never had a claim, or even any kind of minor injury for that matter.

    Nice eh?

    Just thought I'd share the joy

    Steve

  2. #2
    Allan Guest

    Default Re: 25% increase for WC in CA

    Steve:

    What do you guys do with subs, do you have to cover them or can they go bare (like Texas) or do you require each to have their own coverage? My point, is using subs cheaper from a WC perspective?

    Allan

  3. #3
    SJP Guest

    Default Re: 25% increase for WC in CA

    Allan:

    Yes, using subs 100% is cheaper from a wc perspective, because I don't have to cover them, but a lot more expensive from a gl perspective, although I have not researched specific #'s for the latter. However, all of my subs must carry WC and GL to min of $500k, sign hold harmless, indeminity agreements and add me as additionally insured, as a requirement of my WC and GL policies

    I'm sure you are well aware of how difficult it is here for me to work here 100% subbed - almost impossible with the volume that I do (or want to do, I should say) of around $500k-$700k per yr, because of the gl policy restriction of around 30% max.

    Steve

  4. #4
    Joe Leppek Guest

    Default Re: 25% increase for WC in CA

    Using subs is not really cheaper. Everyone's Comp insurance has gone up. Not just the Generals. Our sub costs run about 30% of the cost of the project. Approximately 30% of the sub cost is their labor force. Their Comp insurance has increased approximately 50% since January 1st. Who pays for that? We do. Eventually the cost gets passed on to the customer.
    Example-
    Contract for home only $250,000
    Approximate sub costs- (30%) $75,000
    Appx. Subcontractor's Labor Cost- (30%) $22,500
    Increase in comp fees for subs in California since Jan. 1- 50% $11,250
    Increase in comp fees for Generals- (50%) $14,000
    Total fee increase passed on to consumers for a new home since Jan 1st- $25,250.
    Who wins? The guy who can fake a back injury and get paid almost as much to stay home.
    Joe.

  5. #5
    Dick Seibert Guest

    Default Re: 25% increase for WC in CA

    Steve:

    Have Gary research another group for you, my Comp broker put me into another group at renewal when I got that same notice and it actually decreased my rates to $55.62 per $100 up to $21.99 and $18.21 for $22 an up per $100.

    On the GL issue; today I proposed to some guys that they go on to my payroll instead of subcontracting, and ran into resistance because of the taxes involved! They don't want to pay taxes! They say they don't have to pay taxes and they want their price increased by the amount of deductions withheld from their checks. That means that if we would have subbed out a trade for $10,000, they are going to want something like $13,000 to make up for the taxes withheld, and it's going to cost us something like 50% more to pay our comp premiums (assuming 20% rate) and our share of taxes, so what use to cost us $10,000 is now going to cost us $19,500! The subs want us to pay their taxes for them so they can net the same amount!

    Are the IRS and the state taxing agencies really behind this crisis? Has there been wholesale tax evasion on the part of subcontractors and is this governments' (Fed’s and/or State’s) way of getting the taxes and insurance premiums paid? I know the IRS has been threatening to come after the generals for taxes not paid by their subcontractors for some time, but why don't they just go after the subcontractors themselves? Maybe if they can get us to withhold the taxes from the subs by making them employees it's a lot easier for them. I think the subs are going to have to realize that the game is over, but in the meantime we have to get our jobs built and conform to the insurance companies’ regulations.

  6. #6
    Bob Kovacs Guest

    Default Re: 25% increase for WC in CA

    Dick-

    How is it that the subs are not paying taxes? I'm assuming that you're 1099'ing them all at year's end, right? If that's the case, the subs income from your company is being reported- if taxes aren't being paid, it's our illustrious IRS's problem- not the general contractor's. If you're not filing 1099's, then you're perpetuating the very problem that you're looking to solve.

    Bob

  7. #7
    Dick Seibert Guest

    Default Re: 25% increase for WC in CA

    I 1099 them Bob, they claim that they have enought write-offs etc. to avoid taxes. Another way they have around it is some incorporate and you don't 1099 corporations, I've never understood why the IRS doesn't allow 1099ing of corporations.

  8. #8
    Bob Kovacs Guest

    Default Re: 25% increase for WC in CA

    Well, then I guess they should just continue on as subs, then, and deal with all the paperwork insurance, estimating, warranty work, etc., that it brings along with it. If they're good enough to do all that, then they deserve to be subs and call their own shots, I guess.

    Bob

  9. #9
    Dick Seibert Guest

    Default Re: 25% increase for WC in CA

    That's what they want to do, but I can't hire them as subs anymore, that's what Steve and I are facing in California.

  10. #10
    carl sperry Guest

    Default Re: 25% increase for WC in CA

    Maybe you guys should check into staff leasing. The state has no plans of reducing the W/C premiums in the near future. The reason behind the increase this time was so the state fund could "beef up" there bottom line. There was an article in the last issue of Southern California Builder about it and also about the SB 800 that was passed earlier this year.

    I also heard that the insurance commissioner was runing for Gov here in CA. I find it very interesting that the only company in CA writing W/C coverage (that anyone can afford) is state run. Every time I turn around there is another fee to pay. Yet we are billions of dollars in debt.

    The price of 87 octane fuel went from $1.51/ gallon to $1.83/ gallon in the last seven days. What is the cause for this? Did you also know there is 38 cents per gallon taxes on gas. 18 of which goes to guess who? California. Take, take & take. That is all the state does.

    I was in my insurance companies office two weeks ago ready to start a fight over the 100% increase in my CGL policy. One of the ladies who works there is married to a plumber. She said he will have paid over $150,000 in W/C premiums by the end of this year!

    I just dont get it. How does the small volume contractor stay in business when there are other people out there who dont follow the rules? I will not name any names but I think you know what I mean.

    The real fun part is if you have jobs already bid or even worse signed, and you budget X amount of dollars to cover you W/C & CGL costs where does the difference get covered from? YOUR PROFITS! Oh by the way mam I need to charge you 25% more because the greedy, theving, corrupt insurance industry raised all the contractors premiums by 25%. You understand, dont you?

  11. #11
    Dick Seibert Guest

    Default Re: 25% increase for WC in CA

    Carl:

    Maybe you hit on the problem. If generals can't subcontract, it eliminates the small subcontractors that don't pay comp by doing the work themselves, or those little subs that pay their employees under the table. If almost every small subcontractor goes on to the generals' payrolls, then much more is paid into the Comp fund and it solves their bottom line problem. We generals are ultimately paying, because subs are reneging on their bids.

  12. #12
    Joe Leppek Guest

    Default Re: 25% increase for WC in CA

    My comp rate (I am in Northern California) in September of 2002 for a carpenter under $22.00 per hour was 35%. It now is 62.31%, but it is discounted to 47.31% due to a group rate through my Builder's Exchange. I also get a kickback from the Builder's Exchange based on losses for the group. It still hurts. Like Carl said, when you bid a job last year, start it this year, big surprise when you run a "Budget versus Actual" report and see the loss for insurance.
    Anyone making over $16.00 per hour, it pays to raise them to $22.00 per hour.

    P.S. - Been in business since 1992- same insurance company- No Losses EVER!!

  13. #13
    Dick Seibert Guest

    Default Re: 25% increase for WC in CA

    Whatever it costs, we've got to have it, even in Texas:żIlI. We don't need Workers' Compensation.

    We hear a couple of variations on this theme. The first is that a courier has only one or two employees -- all the rest are independents.
    Of course, all the arguments for the previous myth then apply.

    The second rationale is that your state allows companies to "opt out" of Workers' Compensation. Only a very few states permit
    this: New Jersey, South Carolina, and Texas. Only in Texas is the practice common. Yet, before anyone reading this relocates to
    one of the three states mentioned, consider all of the consequences.

    Texas publishes a pamphlet entitled "The Dangers of Going Bare," covering the reasons why employers might want to think twice
    before foregoing Workers' Compensation. It applies equally well to the other states. Among the chief perils of "going bare" are:

    1. Employers face unlimited liability if an injured worker can prove any negligence. And the burden of proof is on you. Try convincing
    a jury of your peers that you had nothing whatsoever to do with putting the worker in a dangerous situation.

    2. Employers lose their most potent defenses, such as citing the "worker's own negligence, his acceptance of the risk, and the
    negligence of other employees."

    3. No protection against awards for pain, suffering and punitive damages.

    4. Full responsibility for your own attorneys fees and other defense-related legal expenses.

    5. Risk of having a federal bankruptcy judge "order the immediate sale of [your] business." That means you lose not only your
    business -- but rights to your customer lists, etc.

    You cannot count on simply being able to reincorporate and start over. Weigh all of these serious and costly risks against the
    real -- but limited -- savings associated with not carrying Workers' Compensation at all."

  14. #14
    Dick Seibert Guest

    Default Re: 25% increase for WC in CA

    There is an interesting article in this morning's paper about the WC crisis here in California. Dozens of carriers have gone broke trying to pay the claims, how can we blame the "greedy" insurance companies for the high rates, when it's our employees that are abusing the system (along with the "greedy" doctors, hospitals, and lawyers)?


    Today's Paper

  15. #15
    Allan Guest

    Default Re: 25% increase for WC in CA

    Dick:

    There are several unfunded potential problems on the horizon, including Medicade (several triliion $), private pensions, of course Social Security, deficits at the federal level (I thought Republicans were fiscal conservatives), deficits at state level (see CA), deficits at local level, and now insurance crisis. For those that work and produce better hide your wallet. I think interest rates are getting ready to really spike up. GW has done a good job of lowering taxes, helped me out a lot, but I just worry about deficits.

    Allan

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