Worker’s Compensation Insurance is it necessary part of film production. People do get hurt in film production and in some cases even worse can happen. Providing a system for taking care of cast and crew who are injured while on the job is a benefit I fully support. It does, however, not need to be an excessive charge or become a hidden charge or huge profit center for the payroll services. I do not have a problem with any business offering a service making money, but where I draw the line is when that business is overcharging for a service you can get anywhere else for more than 50% less than what the payroll services charge on their rate card.
The Payroll services are overcharging for worker’s compensation
Workers’ compensation is another big profit center for payroll services. The rate card they charge for crew is 4.8%, but if a producer were to buy your average vanilla entertainment workers comp insurance package, the rate for crew is going to be about 1.2% The difference between 4.8% and 1.2% is substantial; 4.8% versus 1.2% is 3.6% overage. So the payroll services are pocketing approximately 3.6% on aggregate payroll. That is the difference between the actual rate if you bought a policy directly from an insurer and what an industry payroll service is charging you.
The Payroll Services Don’t Actually Carry Workers’ Compensation Insurance
To increase their profits, the payroll services are probably self-insuring and reinsuring to cover any big losses. What is reinsurance? So, by way of example, if an employee dies or becomes paralyzed while working, a company that is self-insuring can buy a policy that covers only catastrophic instances to reduce some of the risk in self-insuring – that policy is classified as reinsurance. It is a smart business decision to make sure that any big losses are covered in the event of disability or death. The rates for these packages are really cheap. They’re going to be somewhere around 0.125% or 0.25% to cover.
The industry payroll services are essentially rolling up a whole bunch of retail insurance, sold to the producer, into an insurance product that they can earn a bigger profit from. So payroll services are essentially collecting piles of insurance money without having to pay anything near 1.25%, which is the actual retail rate for a producer to buy worker’s compensation in a separate policy.
To be clear and fair: finding your own insurance package for employees in the category of dancers, stunt performers, marine and aircraft circumstances costs more than 1.2% and sometimes those will have to be insured by a state required policy because private insurers won’t take them. So, we can’t insure those people through the average workers’ compensation package we’d get from a AAA rated workers’ compensation carrier. But, we don’t all employ dancers, stunt people or boats and marine events.
Is It Possible To Process Crew Payroll Without Being Gouged Or Overcharged For SUI
Three or four years ago, I was curious about whether I could process payroll for the show we were working on without using an entertainment payroll services. The show had roughly $600,000 in aggregate payroll and I was curious to see if I could do it with our own workers’ comp package, using our own software and using an average payroll service like ADP or Paychex (a non-industry service anyone could find online or pretty much anywhere) that processes payroll for any business in America.
And we pulled it off (very simply) and the difference between what we were paid by that studio for fringes, labor, and workers comp was basically $30,000. The producer billed the studio as if we were using any of the entertainment payroll services. But instead of processing it through an entertainment payroll service, I processed through Paychex and made the contributions to the unions and everything else manually. At the end of the show, I was able to save $30,000 on $600,000 aggregate payroll and put that money in the producer’s pocket even though I was just testing that approach and didn’t grind the pennies.
We are required to carry Workers Compensation Insurance (and that is a good thing), but we are not required to be ripped off by the payroll services who are charging us two and three times more than we would to pay if we bought an insurance policy through a AAA rated carrier. This is another example of the payroll services not honestly representing where they’re profiting. In this case the profits are even more excessive that the hidden SUI fees.
They don’t disclose that they probably self-insure and they don’t allow you can get the same coverage from just about anywhere. They do, in fact, force us to use their extremely expensive coverage.Again, if the producers knew they were pocketing more than the 1.5% handling fee, they would explode with an expletive laced tirade.