Here's how small contractors around here do it: Have your guy sign up with Labor Ready or some other temp labor outfit. He will be paid minimum wage and the cost to the contractor is about $16 per hour.
Then you supplement his minimum wages with cash under the table, an amount previously agreed upon. This way you have the best of both worlds, a legal, proper, workers comp covered employee and you're also paying cash so the worker is happy too.
Also, since the worker is not your employee, you are not subject to lawsuits for hostile work environment, discrimination, sexual harassment, etc.
This is a cool trick for small contractors, but once you are working guys full time, it's cheaper to make them real employees and hire a payroll service.
HTH
