Monday, October 7, 2013

Is Workers Comp Necessary for Your Small Business?

There are small businesses sprouting up everywhere and thanks to the Internet, you can manage and grow your own business with ease and professionalism. Small side cleaning businesses, sales operations, cupcake bakers and baby-sitting operations have become full time endeavors for some; and though you can do a lot of things on your own, sometimes you do need others to work for you so that you can manage the operation.

Employees or Independent Contractors?

Though many small companies are opting to have independent contractor arrangements with workers, some still prefer to have employees instead of contractors as a personal preference. If this is your choice, workers comp must be a consideration for you.

When it comes to workers comp, various states have different requirements. For example, some states do not require you to have workers compensation insurance if you have less than three workers, while others require you to have it if you have one independent contractor who is subcontracting out jobs.

There are some trades that sometimes don't require you to get workers compensation insurance including, housekeepers, child care workers, farm workers, non-profit employees and paper boys. However, these trades are going to vary state by state.

What if You Don't Want the Hassle?
If you really don't want to hassle with workers compensation, then working only with independent contractors is the best way to go. However, if you really must have employees and subcontractors, there are things you can do if you don't want to get this type of insurance.

Basically, you have to make sure to cover yourself, especially if you have workers out doing any sort of physical jobs. In order to cover yourself effectively, you want to consult a lawyer and draw up several contracts. Your lawyer might also have additional contracts that he will recommend for you based on specific rules in your home state.

The basic contracts you will need your immediate subcontractors to sign include:
  • A contract stating that they carry adequate liability insurance on the work that they do.
  • A contract stating that they are taking care of workman's compensation, unemployment taxes, and any other taxes and benefits related matters on anyone working on the job under them
  • A contract or waiver stating that all of their subs have been paid out (This contract must be signed after the job is complete and before you make the final payout. This insures that subcontractors you have no immediate relationship with, do not have legal grounds to come after you or any private property owners of the job site for non-payment)
Contact us to learn more strategies to increase the efficiency of your business.

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