WORKERS COMPENSATION INSURANCE – CALIFORNIA
Businesses caught without California restaurant insurance risk liability for any injuries or damages endured by their employees, as well as potential lawsuits from past and current employees. In addition, the guilty businesses will be subject to the state’s hefty penalization fines, which can become a significant burden to your business.
Rates vary depending on various different factors such as:
- Type of Industry
- Years Experience
- # of claims in the last 5 years (severity and frequency)
- # of employees
- Annual Payroll
- Employees Job Description
It’s important to note that if your business is operational without Workers Compensation and with active employees – the rate will be greater, and most of the top insurance carriers in California will not be interested in insuring your business. Lapse of coverage is a huge negative in the eyes of insurance companies.
The most important figure in your rate is the cost per $100 in payroll. The riskier the job, the higher the rate you will get. For example, if you are a General Contractor you can expect a high rate.
Audits are done after every 12 month policy period to see what the actual payroll ended up being. At the end of the audit, if the payroll was less than estimated, you can expect a check back from the carrier based on the difference in premium. If the payroll ended up being higher than estimated, you will receive a bill from the insurance company to pay the difference based on your rate per $100. As an employer, you want that figure to be as low as possible.
With regards to workers compensation insurance, California business owners must correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.
Below are the definitions defined by the IRS:
Independent contractor – If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors.
However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.
Employee – Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.
Example: John Doe is a salesperson employed on a full-time basis by Greg White, an auto dealer. He works 6 days a week, and is on duty in Greg’s showroom on certain assigned days and times. He appraises trade-ins, but his appraisals are subject to the sales manager’s approval. Lists of prospective customers belong to the dealer. He has to develop leads and report results to the sales manager. Because of his experience, he requires only minimal assistance in closing and financing sales and in other phases of his work. He is paid a commission and is eligible for prizes and bonuses offered by Greg. Greg also pays the cost of health insurance and group-term life insurance for John. John is an employee of Greg White.
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