A big issue for small business.
COLUMBIA COUNTY – Steele Andrews, owner of the Silvanus Lodge on Route 22 in Hillsdale, believes he and other small business owners are being severely overcharged for their Workers’ Compensation Insurance costs.
Workers Comp is a mandated cost, Andrews said, “which is good. It covers both myself as the employer, and my staff, should they be injured.”
But, he said, there’s a minimum amount below which premiums and other costs cannot fall. For a small business, this minimum is not nearly as minimal as it is for a larger business.
For 2014, Andrews’ Workers’ Compensation bill for his nine-room motel with one part-time employee was $983.28. Of this, $250 was an administrative fee, and the balance was fees associated with minimum coverage for a business with $11,000 in payroll.
Andrews’ payroll costs amount to $3,000, but it doesn’t matter. For any business with a payroll up to $11,000, the insurance premium is the same.
This means that Andrews’ Workers’ Compensation Insurance costs of $983.28 amount to 32.8 percent of his total payroll.
Times are hard, but not that hard.
The normal charge for housekeeping staff is not 32.8 percent, but 5 percent, Andrews said. But not if you have a small staff.
“If I have $100 in labor or $11,000,” he said, “the cost of the policy is the same.
“The hourly rate for my one part-time employee is about $14 an hour,” Andrews stated in a letter. “The cost for Workers’ Compensation is $4.20 for each hour worked. In a larger business, the cost for Workers’ Compensation would be about 70 cents an hour.”
The annual premium includes a $250 administrative fee, the cost to review, audit and draft the policy. He called this cost “ridiculous. That’s a lot to pay for a stamp.”
“This also covers audits of about every two years,” Andrews said in an email. “In my case, they have audited one time in 15 years — I guess because my payroll is pretty simple.”
Andrews said he understands how it happened.
“At one time, Workers’ Compensation was not mandatory,” he said. “No one wanted to insure a small business: There was no money in it. So the insurance fund stepped in and said, ‘We’ll do it.’ They took the industry baseline because they didn’t want the business.
“Once it’s mandatory and regulated, there needs to be equity,” Andrews said.
The solution, he said, is simple.
n “As this is required by law, there should be NO ‘minimum’ payroll. A small business should have the same percentage as a large business. It is not as if a small business has a choice.” If Marriott is paying 5 percent for Workers’ Comp, so should Silvanus.
n The $250 administrative cost should be recalculated to reflect the actual costs generated by the entity being charged.
The Workers’ Compensation Board and the New York State Insurance Fund are guiltless, he said — “they charge what they’re required to by law.”
n These numbers are dictated by the state of New York,” he said. “The only way to correct this is to have the state submit regulation. There is no other option.”
Andrews may be a lone voice crying in the wilderness, but he is not the only businessman bearing these disproportionate costs.
“We’re small businesses,” he said. “We don’t have anybody to check our numbers for us. You don’t have time to look at these bills.”
As a certified public accountant, Andrews checked his own numbers and has been doing so for a dozen years at Silvanus.
His fellow small businessmen “don’t even know” they’re being overcharged, he said. “Nobody realizes it. If I hadn’t been overcharged, I’d probably have another $10,000 in my pocket. That would be a nice vacation I’ve never had. They’ve taken that money out of my pocket by law.”
In a June 20 letter, Andrews asked state Sen. Kathleen A. Marchione, R/C-43, for her assistance in rectifying this situation.
Marchione’s aide, Josh Fitzpatrick, said in a July 14 email that the senator would be addressing Andrews’ situation and the effects of rising premiums with the head of the New York State Insurance Fund.
He did not, however, address the question of the inequities in premium rates between large and small employers, something that Andrews said can only be changed in the state Legislature.
Fitzpatrick stated, “Sen. Marchione’s office had contacted the New York State Insurance Fund on Mr. Andrews’ behalf, had a detailed, 25-minute phone call with a representative at the fund to outline the particulars of this situation and the negative impact of the rising premiums, and to specifically advocate for Mr. Andrews,” according to Fitzpatrick. “The senator’s office is going to take it even further by directly contacting Kenneth R. Theobalds, chairman of the NYS State Insurance Fund, asking that Chairman Theobalds personally look at this specific situation of rising Workers’ Comp premiums that are hurting small businesses, such as Mr. Andrews. Sen. Marchione will advocate for Mr. Andrews on this matter, just as she’s done on other issues for him, and will keep working to find a positive solution.”
Betsy McCormack, a spokeswoman for the NYS State Insurance Fund, said the fund “would never want to make the costs so prohibitive,” but “we, as the insurance carrier, have to follow the rates.”