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Liberty Bay by the Dollar Savings

With our program, whenever a payroll is tallied, the bookkeeper is adding the hours worked to the compliance categories of ESD and Worker Compensation. The program automatically produces complete reports for these obligations. This feature dramatically reduces the time spent in gather the records of wages, hours and risk classifications to prepare quarterly filings.

There are four specific, and radically different, ways that compliance programs can save small business lots of money.

  1. Bookkeepers Hours
  2. Granular Payments of Premiums
  3. Save on Due Diligence
  4. Fines and Penalties

BOOKKEEPING HOURS

With our program, whenever a payroll is tallied, the bookkeeper is adding the hours worked to the compliance categories of ESD and Worker Compensation. The program automatically produces complete reports for these obligations. This feature dramatically reduces the time spent in gather the records of wages, hours and risk classifications for preparing the quarterly filings.

A company with just six employees might typically have a bookkeeper spending about 2-3 days per quarter to prepare these reports from payroll journals and transferring this data to Excel spreadsheets to conform to state reporting formats. (Note that a payroll add-on program is bought to aid in these reports.)

A company called Seal Pro does stripping and coating of parking lots. After starting to use our compliance programs, the time has been reduced to one hour a week monitoring the gross payrolls. Now, the quarterly reporting takes one hour(or a total of 4 hours a quarter).

The savings are calculated as follows for each quarter:

One bookkeeper @ $17/hr times 3 days = $408/quarter versus 5 hours @ $85. This amounts to annual savings of $1292/year for a typical small business. But more important, those 12 days can be used for more/other productive bookkeeping work such as job costing.

GRANULAR PAYMENTS OF PREMIUMS

By using our program, companies can apply multiple work/risk classifications to every employee and thus avoid paying the highest premiums for every hour for every employee.

For example:

A berry farm in Port Angeles expanded their operations to cut hay. After an audit, it was fined $14,000 in the highest ranching classification for not having a correct risk classification. All they had to do was apply for a new risk classification which was

no more than their berry operation class.

A small building contractor had a fabrication and storage yard. He had his employees work there to keep them busy. But since he did not know about this risk classification, he paid for a machine operator risk class at $11/hour vs. the yard class of $2.80/hour. The caveat for this type of operation was that the storage yard worker had to work in the yard for 8 hours to qualify.

By scheduling work ahead of time, the business owner could save the daily premiums amounting to $262 per month having the employee work one day each week or $3148 per year.

There are specific risk classification for 23 different industries in Washington State. Each has qualifying Administrative Codes with corresponding granular hourly exemptions available to any business if they knew they existed. Our compliance programs are capable to provide these small business how to use them.

SAVE ON DUE DILIGENCE

A terrifying example is an audit request by a state or insurance agency. This can be time consuming as payroll companies charge for the reports demanded by the auditor. A compliance program can make this task very simple as all data is historically available with a few keep strokes.

Anytime a company is acquired or is raising on an equity round, there is a need for due diligence. This can be so time-consuming and stressful. By having all of the payroll and compliance records available in one program, this can greatly reduce the cost of such due diligence.

For example: if a company is in the middle of such a due diligence, the upper management might spend one full month on this task. At just 100 dollars per hour, this can balloon to a $16,000 expense. Assuming that this will only happen once every four years, than the annual budget savings would be $4,000.

FINES & PENALTIES

Monthly reporting to these agencies is replete with serious consequences for failure to file on time, failure to correctly identify premiums, or failure to make the payments.

There are four kinds in Washington State but represent al states:

1. Unregistered Employer @ $500 each occurrence or 200% of assess premiums—whichever is the higher amount

2. Failure of keep records @ $250 per employee, per month up to three year; or 200% of premiums for each occurrence

3. False reporting or misrepresentation: 10 times difference in reported and assessed premiums

4. Insufficient records @ $250 for each offense

For example, a remodeler has his father help him on a weekend to install a mail box. A Labor and Industries inspector cited him as an Unregistered Employer and fined him $5000 for that (1) hour of work using Administrative Codes guidelines.

Large companies can be fined as much as 200% of assessed premiums that would total $100-300,000. Large heavy equipment pile driver, loggers, concrete remix and installation companies, and transportations companies have had these fines and penalties assessed. These fines apply to companies treating employees as independent contractors.

Such huge fines have effectively shut down many businesses. The fines are administrative and challenging the fines can be prohibitively expensive and unlikely successful.

Minnesota “In addition to other liability, an uninsured employer may also be fined by the department for failing to insure employees, regardless of whether an injury has occurred. The employer may be ordered to provide the necessary insurance coverage, to refrain from employing any person at any time without insuring the employee and to pay a penalty of up to $1,000 per employee per week during the time the employee was not insured.”

The most impact is interpreting how to handle the misclassification of independent contractors:

IRS “Impact of misclassification: If an employee is misclassified by an employer as an independent contractor, penalties may be assessed by the IRS under Internal Revenue Code Section 3509. The penalties vary depending on whether the misclassification was willful or not, and if not willful, whether proper returns were filed. In the case of honest mistakes where the employer filed IRS Forms 1099-MISC, the penalty will equal 1.5% of wages paid to the employee, plus 20% of the amount that should have been withheld for Social Security and Medicare tax from the employee, plus 100% of the employer’s share of Social Security and Medicare tax (the employer “match”). If the mistake was not willful but Forms 1099-MISC were not filed, the 1.5% and 20% penalties are doubled, and the 100% match remains. If the employer willfully misclassified the worker, the penalties will be equal to the full amount of taxes that should have been withheld (income, Social Security, Medicare and the employee match). Additionally, under Internal Revenue Code Section 6672, this penalty can be assessed simultaneously on the company itself and on its officers, personally, if they are deemed to be responsible. Finally, additional fines related to failure to file and failure to pay may result, as well as interest on the balance due. The employer cannot recover these taxes or penalties from the employee.”

Our program can greatly reduce this risk by providing an oversight on the assignment of classifications. The resulting savings could be as high as $300,000. In many cases, the penalties from these compliance authorities can be so high as to force the companies into bankruptcy.

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