- Parent Category: Services
- Category: Payroll, Finance & Insurance
- Published on Thursday, 02 December 2010 23:55
- Written by Debra Kaufman
Most film and TV productions need insurance, finance and payroll. A standard entity in Hollywood for decades, payroll companies like Cast & Crew and Media Services take responsibility of all the onerous accounting tasks that no producer wants to be burdened with, from workers comp and residuals to taxes. Insurance companies are equally as important, as producing a movie or TV show without insurance is simply not an option. And for all the independent film projects that require funding, there are companies that offer financing and introductions to investors. Whether in California, South Carolina, China or Bulgaria, these companies take care of all sorts of insurance complexities for small indie films and studio blockbusters alike.
As for current trends in payroll and insurance, one that’s impacting every film and television production is the recession. Tough economic times have hit the TV/film industry just as it has every other job sector –– and with budgets tighter than ever, fewer and fewer projects are getting greenlit. P3 Update talks with several payroll and insurance experts who reveal the unique effect the recession has had on their business.
“Everyone for years and years has relied on services to manage the backroom operations of payroll for what is really a temporary project,” says Adam Faust, executive VP of marketing and sales at CAPS Universal. “As a producer, you are just interested in getting it into the can, edited and delivered, and [moving] on to your next project. You don’t want to have to deal with everything related to payroll, which can include workers comp claims [and] unemployment claims. There’s no room to be sloppy.
“Some do think they can’t afford a payroll company,” Faust continues. “It is, unfortunately, the cost of doing business.” Linda Maslow, CEO/Founder of the Maslow Media Group, agrees. “Since the rules changed in the mid-1990s about how you classified employees, more media corporations departments, production companies and even smaller companies are finally going to an outsourced payroll model to protect themselves from the liabilities that can occur anytime you hire someone,” she says. “It doesn’t pay not to use a payroll service if you’re in the business of hiring freelancers.”
In trying times, people often look for one-stop solutions, and Entertainment Partners (EP) is one such company that offers a variety of services that film and TV productions need. EP’s mainstay is payroll services for studios, major and small indie films, and TV/commercial production. The company is also home to Movie Magic, the popular scheduling and budgeting software that has become an industry standard in Hollywood. When EP opened its doors over 30 years ago, the accounting software was among its first offerings. “Most productions hire a line producer who puts together a schedule and budget using Movie Magic,” says Michael Hill, executive VP of marketing and sales. “The accounting software is separate. If you use us for payroll, you get the license for that software as part of the package at no separate cost. Or you could license the accounting software as a separate feed.”
To stay current, payroll companies are constantly updating their software. Hill reports that EP has updated with Vista and Global Vista software while working on a third accounting system “that will blow everyone away.” He notes, “The needs of the production community continue to evolve, so we have to constantly stay on top of their needs.”
PayReel Founder/President Heidi McLean reports that her company offers a highly customized system and is “always upgrading” its software. PayReel is also going green, which is a hot trend in the industry that saves dollars as well as trees. “We’re trying to move everything into the non-paper world,” says McLean. “We no longer have to print out timesheets that people fill out and fax to us. That’s two pieces of paper we’re saving. Also, data entry leaves lots of room for error. With online timesheets, it’s correct from the beginning and more user-friendly.”
Another major trend that payroll experts are seeing in the film/TV industry is how state and federal authorities are cracking down on the often-used — and abused — designation of “independent contractor,” who is often actually an employee. The difference between independent contractors and employees was spelled out long ago, but Hollywood productions have often fudged the difference. “Crew Connection is a 1099 company,” McLean says, referring to the tax form sent to independent contractors. “In 1995, we saw that line graying, which is why PayReel was established. Not everyone is an indie contractor, and we didn’t want to give up the business just to be in compliance.”
Faust notes that various government agencies are stressing the difference between the two types of employment. “The Feds, states and municipalities want to make sure that people understand the difference between an independent contractor versus an employee,” says Faust. “For years, many in the industry have gotten by with writing checks out of the production checkbook to [the] people they hire for the day … and [they] think that’s all they have to do.” McLean agrees: “The state and federal governments want their money now. They see this as a big gap for tax revenues. Whether it’s IRS agents or states like California strapped for cash, compliance has become a big issue for the industry that uses a lot of indie contractors.”
What’s the difference between an independent contractor and an employee? “If you are showing up on set at a call time, have specific duties and are receiving direction and control from someone, you are clearly not an indie contractor,” Faust explains. “An indie contractor is given a task, but he manages his own crew and time, and uses his own tools.” To dispel any confusion, McLean’s company offers a short self-audit test on the website. “We’re coming up with products and materials to educate people,” she says. “It’s a big enough issue now, and I want my customers and crews to sleep well at night. We are being firm. We’re saying if you want us to pay this person as a contractor, then we have to vet it. The risk is on us, so it’s really our call.”
As a result of the government crackdown on independent contractor status, some payroll companies are seeing an uptick in business. “We’re seeing a lot of smaller companies that we might not have heard from before, coming into a proper employer environment,” says Faust. “The need has grown,” agrees Maslow, “and it’s become a big business.” Maslow also notes that, in addition to paying Medicare, the payroll company also covers the workers for general liability and workman’s comp, which means they have to be aware when the production involves someone climbing Mount Everest or fighting sharks. She recalls one production early in her company’s business when a special effects expert burned down City Hall. “The producer calls me to say the bill is $25,000 — and it’s my problem,” she recalls. “That’s when I realized there are some risky situations that we have to know up front, and educate our clients about the importance.”
Another impact of today’s tough economy has been the increased importance of state tax incentives for production and post. “Tax incentives still rule all scripts and all locations of where the studios finally decide to park their tents,” says EP’s Hill. “We have a department now that caters to assisting producers from the majors to the indies to review their schedules and work with their production and accounting teams to find the best state to get the best returns for their dollars.” And EP doesn’t stop there. Ron Cogan, VP of marketing and communications, reports that his company has begun to take on the administration of state tax incentives. “To quality for rebates, there is so much bookkeeping involved,” says Cogan. “It takes a lot of tracking and a lot of work, and we take on the entire process.” New California tax incentives have brought some productions back to the state that might have gone elsewhere. But Hill notes that the queue for these limited tax rebates fills up quickly. “It has made California a bit more competitive as a location, which is welcomed,” he says.
PES Payroll prides itself on exceptional customer service that allows them to focus on what is most important: the production. For over 15 years they’ve been providing payroll services to the feature film, television and commercial industries, along with taking care of the payroll needs for extras, commercial talent and staff. PES Payroll is committed to providing up-to-date incentives information along with guidance while determining which programs are the best fit for a production company’s needs. Located in Burbank, Calif., the company also has offices in New York, New Mexico, Georgia, Louisiana and Michigan.
Insurance companies have also been hit hard by the today’s economy. Eric Moody, head of the entertainment division at FilmIns.com (whose parent company is Frankel & Associates Insurance Services), notes that he’s seeing a lot of shorter shoots. “Instead of the production being stretched over six or ten weeks, we’re seeing a couple weeks’ production,” he says. Moody identifies new technology — especially digital cameras — as enabling these shorter, less costly shoots. “The cameras are a lot less expensive, so they can have several on the set,” he notes. “They don’t deal with film stock and they can see what they’re getting on the monitors and get the shoot done more quickly and a lot more efficiently.”
Moody also reports that not all productions buy the required workers compensation insurance. “Most people get insurance because they have to, not because they want to,” he says. “I tell them what meets the requirements for their vendors or locations, but I can’t make them take coverage they don’t want to buy. As long as I tell them they’re not in compliance with state law, that’s all I can do.” The good news, notes Truman Van Dyke Company Executive VP Kent Hamilton, is that insurance rates are “very good” at this time. “The rates for production insurance are lower compared to what they have been,” says Hamilton. “The economy and competition among insurance companies have made Errors and Omissions insurance premiums the best I remember in over 23 years.”
Productions shot in states with tax incentives (depending on the state) can rebate at least some of the cost of insurance. “We work with brokerage firms in the various states to qualify for those incentives,” says Hamilton. “Of course, we do that.” International productions are also becoming more common, which can make insurance more complicated. “I’ve got companies based in the U.S., Canada and Great Britain doing movies in Bulgaria, South Africa, China, New Zealand, India, South America and so on,” says Hamilton. “We do international productions all over the world. Insurance needs to be set up correctly to meet the requirements of the financiers, production companies and host country or countries. The money is coming from lots of places, which is mostly a finance situation, but it also involves insurance because we need to include those companies on the list of who’s additionally insured.”
In the States, productions go wherever the incentives are. Hamilton points out that productions are in Louisiana, South Carolina, New Mexico, Pennsylvania and many other states, and on the international scene he sees productions in Bulgaria, Romania, New Zealand, South Africa, England and even China. “When I first started, most of the business was here and you could handle everything from Los Angeles,” says Hamilton. “But now we are becoming a lot more global in the insurance we provide.”
Even though productions are becoming more internationally financed and more are produced outside of Hollywood, the Los Angeles-based insurance broker is often preferred. “The Los Angeles production insurance brokers are generally more experienced than others,” Hamilton explains. “Yet everyone is becoming more sophisticated. We do quite a bit of partnering with brokers from various states and countries.”
Film Emporium provides the insurance needs of entertainment companies while specializing in film, video and music. Purchased by ABI American Business Insurance Services, Inc., Film Emporium has access to a wider variety of entertainment insurance products and vendor insurance products to better serve the entertainment industry in the U.S. and worldwide through its offices in Manhattan and Sunset Gower Studios in Hollywood. With access to hundreds of companies, Film Emporium expertly matches its clients’ complex insurance needs with top-rated insurance companies and coverage, and it maintains independent status to assure unrestricted access to all insurance markets. Understanding the complexities and challenges today’s producers are dealing with, the company’s brokers are well versed in last-minute and limited-budget situations. And each account is handled by a dedicated licensed insurance broker to assure personalized, expert service.
Film Production Capital provides tax credit-based financing nationwide for film, television, animation projects, digital interactive media, music recording, commercials, live performances, festivals and more. They claim to be one of the largest purchaser/financiers of entertainment tax credits in the country that specializes in independent productions.
As funding options have changed substantially within the last 12 months, one solution is Green Light Film Funding, which provides funding solutions through investors for films that have some or none of the funding required. And one of Tax Credits, LLC’s services is to provide a Film Incentive Loan Program, which prefunds rebates, tax credits and grants that allow production companies to access the value of the anticipated film incentives before filming begins.
With the film/TV industry constantly evolving, experts in payroll and insurance are keeping their collective eye on the future. Faust at CAPS Universal has noted an increase in commercial production, which he hopes bodes well for the future. “That’s a good sign,” he says. “In our case, commercial production is a leading indicator. If the brands are spending money, hopefully that’s a forebear of good things to come.” But the future isn’t without concerns that involve more than the on-going recession. Entertainment Partners’ Hill notes that several guilds — SAG, WGA and DGA — are set to begin negotiations for their new contracts in 2011. “That’s a Damocles sword hanging over our heads,” he says. But in the short-term, this might produce a boon to production: “With negotiations coming up, the studios might have fear of a strike and start producing more movies to put on the shelf.” If so, payroll and insurance companies stand at the ready to take care of business.