Worker’s compensation insurance. We not only carry a policy, but also actually pay the premiums on wages.
We also hire only professional skilled roofers. We do not fit into the market full of illegal workers (that payt no taxes, but absorb the public resources) and “handyman” insurance policies that offer no real coverage in a roofing scenario.
The only reason these types do things this way is to lower selling price, whether or not it leaves the customer on the line if something happens is of no consequence to them. They just look for the quick buck.
Here’s how it works…
The “contractor” (and I use that term loosely) thnks he needs to lower the selling price to sign contracts, since he cannot build value for the long-term…
Materials cost the same as other contractors, so you cannot make the price reductions there.
Operating overhead is approximately the same per unit of roofing, so you cannot cut costs there. (insurance is another example that will be explained shortly)
So what are these “contractors” to do? Screw the customer over, what else? (Now remember, many customers are perfect fits for these “contractors” since longevity, skill of installers, and all the other intricacies that constitute a quality roofing investment are discarded for sake of low price) How do they do this?
The biggie is the labor. In my state, every employee MUST be covered by workers compensation insurance. There is no question about that. This means that since the WC market in Illinois is involuntary, the work comp pool is regulated. NOBODY can get WC cheaper than another by more than the experience rating. This leaves ALL roofing contractors to pay the same percentage of wages for work comp +/- a couple %. In Illinois, it sits at 39% of wages.
Well, to sell lower than the next guy, many “contractors” will illegally pay cash (showing no wages at the time of payroll audit) and pay the taxes on the monies paid to workers, if the CASH actually came out of a business checking account. It is cheaper to pay the taxes than to pay comp and payroll burdens.
Some “contractors” do not even want to do this, so they will pay by check, but still pay no payroll burdens by intentionally illegally mis-classifying employees as sub-contractors and issuing 10-99s at years end. They are still paying only the going labor wage rates, but passing the burden on to the employee to pay the employment taxes. To do this, the “sub-contractor/employee” must make big production to make a living. They still cannot pay the taxes on their men, because they do not charge enough to pay the worker’s wages, and payroll burdens on said wages.
This leaves the customer unknowingly liable for any worker injuries/deaths because they hired a “contractor” that does not pay workers Comp premiums, payroll taxes, and unemployment insurances.
Now everybody, of course, wants a high quality installation. This is natural, and expected when we invest our hard-earned money into our roofing system. High quality requires highly skilled roofers. How do obtain highly skilled workers? You have to train them. Training costs money, and lots of it. Problem is, when you dont even have enough money built into the pricing to pay payroll taxes, where will the money for employee training come from? Wages, that’s where. They will be forced to pay lower wages in order to keep constantly training personel because highly skilled workers do not work for low wages, and will eventually quit.
Well, how do you eliminate or reduce this high turnover rate? Higher wages. How ccan they pay higher wages when they do not even charge enough to pay payroll burdens? They can’t. They end up putting low skilled laborers on the rooftops intalling roofing systems that they are not qualified to install, so that the “contractors” can sell at a lower price.
It is a neverending cycle of low quality and scammiing of the public. It hurts us all. If you dont believe me, let me tell you this…The core of the residential side of my business has shifted from installation to repair of other “contractors’” shoddy work.
General libility insurance…If you ever see a construction company that reeally only does roofing, there is only one reason for it…to lower the selling price to sell more than the next guy in order to perpetuate the cycle.
Roofing is inherently dangerous. Insurance companies know this. They must account for and charge for this risk. Roofing companies (legitimate roofing companies) must pay this high risk insurance. This is usually 5-10 times the cost of “construction”, painting, handyman types of policies doing the same dollar volume of work. So what is a “contractor” to do to be able to sell lower than the rest off them in the cycle? Pull the old GL insurance scam.
The old GL insurance scam consists of construction, carpentry, painting, handyman, etc policies being bought in order to show an insurance certificate. This, however, affords no coverage to the customer when an accident happens, investigations are performed, and it is discovered that this “contractor” is really doing roofing. Roofing is not covered under these policies, and is specifically excluded, but the customer doesnt know. Theye most often look at nothing but what color the shingles are, and what’s the lowest price they can get them for.
So, in closing I will just say that most residential customers take on real risks when dealing with “contractors” that run their “roofing business” in this manner, knowingly or unknowiungly, not to mention running the risk of having to meet me to fix the problems said “contractors” left in their wake.