Sometimes surprises will be pleasant. Like discovering that half-moon you wish to induce a candy out of the coin machine deep within the recesses of a coat pocket. Learning that you’ll obtain workers’ compensation audit coverage for a contractor after you weren’t expecting it — well, that’s a full different quite surprise. Having a bit info direct regarding what form of coverage your subcontractors carry, and whether or not your state actually classifies them as freelance contractors (versus employees) will assist you to avoid a not-so-happy surprise throughout your annual workers’ compensation audit.
Determining whether a subcontractor could be considered an employee
The first issue you would like to understand is that your state and therefore the Internal Revenue Service might have completely different criteria for establishing whether or not a contractor is thought of associate degree freelance contractor (for that you don’t got to give workers’ compensation coverage) versus associate degree worker (for that you need to give coverage in most states).
This means even subcontractors that qualify as freelance contractors for tax functions, may still be thought of workers by state standards. each state may be a very little completely different, however, most need that the contractor has management over the tactic and manner within which the work is completed, among different criteria to be thought of freelance contractors. Here’s info on the classification of employees in a number of SFM’s core states:
- Minnesota
- Wisconsin
- Indiana
- Iowa
- Kansas
- South Dakota
Steps you can take to ensure subcontractors are covered
Any contractor that uses workers is needed to own its own workers’ compensation audit policy. during this case, you’ll wish to urge proof of coverage by inquiring for a certificate of insurance. That’s straightforward enough. It gets a bit a lot of difficult once your contractor is a personal operating alone as AN freelance contractor.
Again, your commencement is to verify that the contractor really qualifies as associate freelance contractor beneath state law. Even once subcontractors carry workers’ compensation audit insurance, if they don’t qualify as freelance contractors, you’ll still be liable for providing coverage. In most states, freelance contractors aren’t needed to hold workers’ compensation audit coverage for themselves, however, they'll opt to do, therefore. If your contractor will have coverage, request a certificate of insurance for verification.
What to do if a subcontractor doesn’t have coverage
If the subcontractor doesn’t have workers’ compensation audit coverage:
- Request a duplicate of the subcontractor’s freelance contractor registration kind if applicable in your state. Some states have a registration method for freelance contractors, and a few don’t. Otherwise, fire a duplicate of the subcontractor’s current license.
- Check to check that the contractor is registered with the state as a business entity.
- Request a Certificate of Insurance for General Liability covering the dates the work was performed with limits of a minimum of $300,000.
When in doubt, ask
Determining whether or not a contractor qualifies as AN freelance contractor is often difficult generally. Don’t hesitate to raise your underwriter or your agent to facilitate. That approach you’ll perceive the implications for your workers’ compensation audit premium promptly, instead of looking for you owe quite you expected at the time of your premium audit, or worse however once AN injury happens.
For additional on guaranteeing subcontractors square measure lined, see our Q&A video on the subject:
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