I would like to know what a small contractor with 2 or 3 employees can do to save some money on his Work Comp insurance. The rates are really high! Should he fire his employee's and hire them back as subs and make them get there own insurance? Should he just fire them and shut down? Just leave it like it is and not eat?
Please only serious answers.
I would consider checking rates with other carriers. You will need to check rates for your entire account, i.e. your Commercial General Liability, Commercial Vehicle, etc. Most insurance companies will not write stand-alone Workers Compensation since it is usually not profitable. The commercial insurance market is currently very soft, i.e. companies want to write more insurance and rates are actually going down–competition for clients is fierce. You should be able to find a good company with lower rates. Of course if you have a bad claims history, all bets are off.
Check rates with your own agent first. Let him or her know that you are "shopping". Sometimes your agent can talk to their Underwriter and get a concession on your rates to keep you as a client. Then you should check with a couple of independent agents. Some companies for you to check–Travelers Insurance, Erie Insurance, CNA, The Hartford, etc.
In terms of firing your employees and re-hiring them as subs, I do not believe that would fly with IRS. IRS has very strict criteria for whom they consider an employee vs a sub-contractor. The major problem with this is they can come back and demand back employment taxes on people you paid as subs that they state should have been categorized as employees. Recently one of my clients had a $55,000 levy from IRS due to this exact situation. In my humble opinion I would not tangle with the Feds.
Worst case scenario is lay off one person or reduce hours but if the insurance cost is your only problem I hope you won't need to do that.
I hope this helps. Good Luck!