The Cost of Independent Contractors

When it comes to commercial roofing and installing flat roofs there is a trend taking place that endangers businesses and building owners, many times without them even being aware of it. Classifying workers as independent contractors.

Many companies today, in an effort to out bid their competition, are classifying their workers as ・independent contractors・ instead of employees. This trend started in the residential market and has recently broadened into the flat roof market. By mis-classifying employees as independent contractors, commercial roofing contractors see a significant cost savings by not having to carry workers compensation insurance or having to withhold taxes and pay their share of payroll taxes. Business owners know the cost to overhead that workers compensation creates. Many commercial roofing contractors, unless they are very large companies, must get their workers compensation insurance through the state program.

gluing down the rubber membrane

gluing down the rubber membrane

 

The current rate in the state program for roofing is $43.12 per $100 of remuneration. That means for every dollar of wages paid to employees they pay an extra 43.12 cents. That is over 43% increase in labor costs they need to add to every bid they submit!

Why should this matter to building and business owners? When a worker gets hurt on the job there is a covenant by law – workers compensation pays all medical costs and a portion of lost wages, and in return the worker cannot file a lawsuit.(unless negligence is involved)

When a company classifies their workers as independent contractors there is no workers compensation to take care of the worker, therefore there is no covenant to protect the contractor OR the building and business owner.

That’s right, the building and business owner can be held liable for ALL

COSTS – medical, full lost wages, even punitive damages.

working at dawn

working at dawn

 

What can a business owner do? Require a ・certificate of insurance・ from the contractor during the bidding process. This certificate will come directly from their insurance agency, not from the contractor. This will provide proof that all of their workers are covered by workers compensation insurance and that you will be protected.

Contractors who engage in this practice also show savings by not having to withhold taxes or pay the employers share of employee taxes. In Pennsylvania that means paying an employer tax on the first $7000 of wages per employee for federal unemployment, first $9500 of wages per employee for state unemployment, AND their matching share of tax for both Social Security and Medicare.

This also deprives the worker of any contributions to their social security account thereby significantly lowering any amounts they would receive in retirement.

Studies have shown the extent of the problem. Studies have shown that in California more than 104,100 jobs were unreported. Other state studies showed these numbers of non-compliant employers misclassifying workers;

– in Maine 14 percent of construction employers

– in Indiana, 47.5% of all employers audited between 2007 and 2008

– in Minnesota in 2005, 14% of employees

– and in Pennsylvania last year alone, DOL investigations resulted in more than $74 million in back wages for more than 102,000 workers

loading the roof

loading the roof

Business and building owners looking for a new flat roof, rubber roof, or any commercial roof and/or building alterations should be aware of this situation and do their part to correct it.

Comments are closed.