As our small businesses grow, we get to a point when it is time to start hiring.  Nevertheless, finding the right people is only one of the challenges. Another is understanding the costs associated with hiring.  Depending on your industry, workers compensation can add a significant cost to hiring. However, the policy provides much needed financial protection for your employees and your business, so it is important to know who needs coverage and how to keep your costs down.

In PA, workers compensation is required of all businesses that have employees, though it is not always clear who is an employee. Therefore, it is important to make sure you are protecting those workers that you are responsible for without taking on the expense of those you aren’t.


Do I need Workers Compensation if I pay workers on a 1099?

1099s and W2s are tax forms and aren’t a determining factor in who needs to be covered. The requirement for workers compensation in PA is determined through the courts based on whether there is an employer-employee relationship between you and the injured worker.  Here are some factors to consider. If the answer is Yes to any of these, you’ll likely be required to provide workers compensations coverage:

  • Do you mandate when and where this person works daily?
  • Do you require the number of hours an employee must work each week?
  • Is this person working full-time with your business?
  • Do you pay hourly wage or weekly salary?
  • Do you provide training?
  • Does the person do the same type of work as you, such as an electrician doing work for an electrical contractor?
  • Do you provide tools, equipment, or materials to this person?

It is better to err on the side of caution.  It is likely that the court will lean in favor of the injured employee when determining the relationship.


Will I be charged for true sub-contractors that I use?

Now that you’ve established who is a sub-contractor and who is an employee, it is important that you aren’t paying unnecessary workers compensation premiums.  If you do not want to pay workers compensation for the sub-contractors that you use, only hire subs that currently have their own workers compensation insurance. And don’t just take them at their word that they have workers compensation, make sure you collect certificates of insurance from all subs.  Your insurance company will want to see these certificates at audit.  If you can’t provide certificates, you will likely be responsible for the premiums associated with that sub.


Call Risk Averse Insurance in Media, PA to discuss workers compensation insurance for your business.

Risk Averse Insurance is an insurance agency in Delaware County that specializes in providing high-quality insurance products at an affordable price.


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