Typically, a person or business that performs a job or service for another company based on a written or verbal contract is considered a subcontractor for workers’ compensation. Subcontractors are not considered employees of the company they are working for, and are often hired for specialized skills or to help complete a project for a client. They report to you, the business owner, and you oversee their work and pay them upon completion of their specific job.
A subcontractor is a worker hired by a general or independent contractor to complete specific tasks or portions of a project. They usually operate as business owners or sole proprietors, providing specialized services beyond the expertise of the general contractor source.
It’s important to understand that business and insurance terms can vary. For instance, a business owner might consider someone a subcontractor, but an insurer may not.
According to insurance specifics, a subcontractor provides their own tools, manages their own work, and has their own insurance (including workers’ compensation).
Examples of subcontractors include:
Subcontractor and independent contractor are similar-sounding terms that have very different meanings. Both indicate a professional who may not technically be an employee of a business doing work, but the primary difference is in who is employing the person.
If a worker is employed directly by a company and receives a 1099 form at the end of the year, they’re considered an independent contractor. If the worker was hired for a specific task by or for a general contractor, they’re considered a subcontractor.
Yes, subcontractors should have workers’ compensation insurance. That is because they are often small business owners, and many states require businesses with even one employee to carry workers’ compensation insurance.
Some states, like Florida and California, have unique requirements for specific industries like roofing and construction.
Failing to purchase workers’ compensation coverage could mean facing steep fines and serious penalties. Businesses that employ subcontractors will also usually insist on seeing a certificate of insurance that proves coverage. Otherwise, the hirer is responsible if an accident happens, which increases their liability substantially.
However, following the letter of the law is only one reason subcontractors should carry workers’ compensation.
Even if they’re exempt, subcontractors should consider purchasing their own workers’ compensation policy. This coverage offers many benefits, including:
Protection against lost wages during recovery from injury
Reimbursement for medical costs
Short and long-term disability payments
For professionals thinking that their health insurance will cover these sorts of things, think again. Many health insurance policies specifically exclude workplace accidents, injuries, and related diseases.
Are you a subcontractor who wants the protection and peace of mind that only workers’ comp insurance can offer? Maybe you’re concerned about marketability with clients. Whatever the case, Kickstand Insurance can help.
We work with clients across almost all industries and we’re intimately familiar with the needs of subcontractors. Fill out our online form to get started! In just 5 minutes you could have a no-obligation quote.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.