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No. The employees who are being paid cash will not have taxes taken out of their pay. This will have an effect on their Social Security and unemployment insurance. It also could affect the employer′s workers′ compensation premium. Insurance companies determine how much to charge for workers′ compensation by using three main categories. They are: type of job performed, amount of payroll, and how many injuries the employer has over a period of time. By reducing reported payroll, the employer would not be paying the proper premium for the risk the insurance company is covering. In addition, this gives that employer an unfair financial advantage over other employers who are paying the proper rate. The Fraud and Noncompliance Unit would investigate the employer for premium fraud.
