Farming operations have typically been run by families. Families are considered exempt from the workers compensation law. Meaning the farm doesn’t have to carry workers compensation on dad, mom, brother, sister, grandma, and grandpa.
If dad hires a neighbor boy to help milk cows, does the farm need to carry workers compensation on the neighbor boy? The answer could be yes or no. A few more questions need to be addressed.
How does the farm pay the neighbor boy?
Maybe the farm chops silage for the neighbor boy in exchange for milking the cows. In this case, workers compensation is not needed since it is exchange labor.
Maybe the farm pays the neighbor boy $20 each time. Workers compensation is recommended, but may not be required. Read on…
How much did the farm pay in payroll last year?
If the farm paid over $2,500 in payroll the previous calendar year, the farm needs to have a workers compensation policy to cover their paid labor.
How much does the farm pay the neighbor boy on an annual basis?
The amount of payroll and the type of work is important when figuring the cost of workers compensation. Different rates will apply for different work. If the neighbor boy helps with livestock, he will be charged a higher rate than if he is completing field work. To manage workers compensation cost, it is best to keep track of payroll by each type of work. If records aren’t kept, all the payroll will be subject to the highest rate.
What if the farm entity is not family?
Partners and members of limited liability companies can choose to include or exclude themselves from workers compensation. Workers compensation is another cost to the farming operation. But before a decision is made to exclude workers compensation coverage, consider the benefits of workers compensation. Farm owners/operators are the livelihood of the farming operation.