It is a common belief, that an employer only provides workers’ compensation insurance to its employees. However, not many know that an employer also needs to provide workers’ compensation to its contractors and subcontractors.
Apart from traditional relationships between an employer and an employee, contractors who are workers under the “Workers Compensation Act 1951.” (the Act), also have the right to worker’s compensation.
In case, you own a business and you hire a contractor. Firstly, you should know whether you need to provide him or her with the workers’ compensation or not. A business owner needs to learn about your legal obligations, regardless of how big or small your business is.
What is the difference between an employee and a contractor?
An employee is a person who works for a company and is considered the party of a company’s operations. On the other hand, contractors provide a service independently. Business owners hire contractors to run their company effectively.
In general, the major thing that separates a contractor from an employee is that a contractor is not bound to work for one specific company. Moreover, they are not on the payroll of the company. Contractors can provide their services to a number of different companies at the same time.
Does an employer need to provide workers compensation for contractors?
You will not get a clear answer to this question. This depends upon the definition of worker and whether your contractor is a worker or not. The definition of a worker varies from state to state.
So, it is important to remember that contractors are not responsible for their own workers’ compensation insurance. Furthermore, in certain circumstances, an employer needs to provide workers’ compensation insurance to its contractor.
When it comes to workers’ compensation, each state has its own set of rules. IF state mandates you to provide workers’ compensation coverage for employees and contractors, you’ll have to give it.
The Workers’ Compensation and Injury Management Act holds an employer jointly responsible and severally liable for the injuries of any of your contractors or subcontractors. You must confirm that all contractors and subcontractors have insurance that covers their employees.
For example, let’s suppose a decorator hires a painter, and the painter faces an injury as a result of an accident, during work. The employer will need to cover the painter under workers’ compensation.
To learn more about who to provide workers’ compensation, talk to our expert lawyers.
Who do you not need to provide the compensation to?
As a business owner, you do not need to provide compensation to independent contractors. Independent contractors are responsible for providing a certain service for a specific amount of time under an already negotiated contract.
Therefore, business owners do not need to provide compensation to independent contractors. The reason is that they are not full-time employees.
Similarly, if the characteristics of your job are similar to an employee. In that case, your employer cannot simply call you an independent contractor to avoid federal and state legal requirements.
What is covered in Workers’ compensation insurance?
Workers’ compensation insurance covers the medical and wage benefits for employees, if they face an injury or get ill on the job.
A workers’ compensation policy usually covers, accidents on-site or in the office, medical bills, eath and related costs.
What are the cons of not paying compensation to contractors?
An employer can lose millions of dollars for not providing a worker with its due right. Being a small business owner, not paying workers’ compensation can be more damaging to your business than an already established business. Financial costs of an uninsured worker’s claim are far more costly than paying the compensation to your worker.
What is the benefit of providing workers’ compensation to your contractor?
In case of an accident at work and a contractor gets injured. He or she is less likely to sue you, if you provide them with workers’ compensation.
This will save you a lot of trouble. Lastly, it will save time and a lot of money which you can lose by not providing workers’ compensation to your contractor.
Thank you for visiting the blog. Please, keep in mind that this content is for informational purposes only. The laws vary from state to state and can change with time. To avoid any problem, please read state updated laws or contact us for legal consultation.
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