Running a business in Suffolk or Nassau County means juggling many legal and financial obligations. One critical responsibility is ensuring proper Workers’ Compensation coverage. Doing it well protects your employees, your company, and your reputation. On the other hand, trying to sidestep the system (especially by paying employees in cash “under the table”) can create serious risks. Here’s what business owners need to know.
New York State Workers’ Compensation Requirements
New York State law mandates that virtually all employers, regardless of size, must carry workers’ compensation insurance for their employees. This includes part-time, temporary, seasonal, and even family members who are employed by the company. The purpose of this no-fault system is to provide medical benefits and wage replacement for employees who are injured or become ill on the job.
The benefits cover a wide range of work-related incidents, including injuries from accidents, repetitive stress injuries, and occupational diseases. These benefits help an employee cover their medical expenses, which can include emergency room visits, surgery, physical therapy, and prescription medications. If an injury or illness causes an employee to miss more than seven days of work, they may also be eligible for cash benefits to replace a portion of their lost wages.
The Hidden Dangers of Paying Employees in Cash
Many business owners may consider paying employees in cash to simplify payroll or reduce tax liabilities. This practice, often referred to as “paying under the table” or “off the books,” is fraught with significant risks that can lead to severe financial and legal penalties.
The main issue is that when wages are paid in cash and not properly reported to the New York State Workers’ Compensation Board and other tax agencies, the employee is not officially on the company’s payroll. This creates a dangerous situation for both the employer and the employee.
For the Employer: If an employee paid in cash is injured on the job, they can still file a workers’ compensation claim. Since their wages were not reported, the business will be considered uninsured. Uninsured employers in New York can face serious consequences, including:
- Financial Penalties: Fines can be substantial, ranging from $1,000 to over $50,000, plus civil penalties that can accrue every 10 days until proper coverage is secured.
- Stop-Work Orders: The Workers’ Compensation Board can issue an order to cease all business operations.
- Criminal Charges: In some cases, failing to have the proper insurance is a felony offense.
For the Employee: While an employee injured on the job can still file a claim, the process can be much more difficult without official records. Furthermore, not being on the books means the employee may miss out on crucial benefits like Social Security and Medicare, as FICA taxes are not being withheld and reported.
Accurate payroll records are the foundation of a sound business. Paying employees in cash and failing to report their wages is not a shortcut; it’s a high-stakes gamble that can jeopardize your business and the well-being of your employees.
If you have questions about workers’ compensation insurance or want to ensure your business is fully compliant with New York State laws, please contact the Camille Bunicci Agency for expert guidance.