A key compliance issue for small business owners hiring W-2 employees is securing mandatory workman’s comp insurance. Failing to have coverage can lead to steep fines.
In many states, once you put employees on payroll and withhold taxes, you must carry workman’s comp. It covers injuries sustained on the job. Make sure to account for this expense when budgeting labor costs.
Premiums are calculated as a percentage of payroll, based on the risk of the work. More physical jobs have higher rates. For lower risk clerical work, it may only be 2-3% of wages. Higher risk labor can be 4-6%.
Don’t let a surprise state audit for workman’s comp catch you off guard. Research your requirements when hiring, and promptly secure appropriate coverage. Penalties add up fast.
Compliance with workman’s comp and other state regulations like paid family leave is crucial when expanding into employees. Avoid missteps through education and prep.
