How does work comp work for contractors?
Two different types of contractors generally speaking,
Artisan (Carpentry, Plumbing, Electrical, sometimes subcontract work out but primarily doing the work themselves)
General Contractors ( Only subcontract work out primarily) (if you have over 50% subs, you are seen as a general contractor)
Workers Compensation is mandated to audit their policies at least annually. (There are some plans that if you have payroll, you can do pay as you go)
Artisan contactor that does the work as a single one man show
Work Comp has generally two options (Ghost policy with no payroll and opting out or sign a waiver opting out of coverage (we even have a policy now that comes with an accident plan) Second option, would be to include themselves for coverage and this generally will go to the state pool in their given state. In Florida that waiver needs to be signed with the state.
Artisan Contractor that does the work and has employees
Generally has one option to get work comp with the payroll included. Cost is based of the type of work that they do and is a percentage of payroll.
This percentage ranges from 5% to 26% depending on how risky their line of work is. Roofing, Tree Trimming Risky! Electrical Work, Plumbing, less risky. Tons of contractors and lots of insurance companies, so rates very depending on the state, company, exc.
Generally will have two options ( Ghost policy with no payroll and generally would opt out of coverage or they might have a policy with payroll if they have some subcontractors that do work specifically for them)
Audits are done annually unless a policy is cancelled before and then it is done during that time horizon. A complete overview is given here.
Earning Records – Gross wages paid to all employees who worked during the policy period – Overtime (shown separately) – Tips, allowances, mileage, etc. – Commissions, bonuses, holiday, vacation and sick pay – Severance paid to separated employees
WHAT RECORDS WILL YOU NEED? • Earning Records (continued) – Tax deferred payments (cafeteria 125 or 401K plans) – Quarterly and Federal 941 tax reports for the policy/audit period – Rental value of housing provided to employees – Payments to employees for any basis other than time worked• Check register – Cash disbursements for payments to subcontractors, temporary employment services or cash/day laborers • Tax reports – 1099s – 1120 Income Tax Returns – 1040 Schedule C – Schedule K (for LLCs)
****** Form showing WC coverage (insurer/coverage dates/policy number)*****
Subcontractors should have a COI issued by the insurer or the contractor’s agent showing the WC coverage for the period that work is performed. This is super important for our work comp clients. If your subcontractors do not have coverage during the time period you do. Then we will need an additional certificate of insurance from them showing proof they did have coverage during your policy period dates. •
Why is this so important? The amount you pay them could fall back under your own work comp policy and cause a large amount of extra premium!!!
NO CERTIFICATE OF INSURANCE? • Any subcontractor or temporary service not providing the proper documentation will be included on the audit and a charge made for the amounts paid to each.
The policyholder has 30 days to dispute the audit results. – The dispute requires a formal letter or fax signed by the principal of the company. – It must specify what is being disputed and support document should be included. – Any additional premium pertaining to the undisputed issue must be paid while the dispute is reviewed for resolution.