When do contractors need to worry about workers’ compensation insurance? As an employer or business owner, you have an obligation to keep your employees safe. But construction is a high-risk industry, and even the best efforts at creating a safe worksite can still lead to an injured worker. If your construction business is growing and you find yourself needing additional hands to get the job done, here’s what you’ll need to know about workers’ comp.
Why Do Contractors Need Workers’ Comp?
In almost every state, employers across all industries are required to buy workers’ compensation insurance to provide medical care and compensation for employees who become injured or ill while performing their job. The protection covers you as an employer, as well; workers’ comp also serves to protect employers from lawsuits resulting from workplace injuries.
Let’s say that you’ve hired an employee to help you with your finish carpentry business. While installing crown moulding your apprentice falls from a ladder and breaks a wrist. You don’t have workers’ comp coverage in place, so you pay out of pocket for your apprentice’s medical bills.
And you continue to pay him while recuperates and heals, even though he’s not able to work. You’ve come out of pocket a pretty penny for the accident.
Then, to add insult to injury, your apprentice decides to sue you, too. Because he’s found out that you were legally required in your state to carry workers’ comp coverage, which you hadn’t gotten around to obtaining yet.
There’s also a very good chance you could face additional ramifications for not covering your employee, too. In some states, not carrying workers’ comp can lead to fines and even criminal penalties.
In summary, one small incident can lead to a huge expense for your carpentry business.
The average workers’ compensation claim costs for a fall for carpenters is $97,69.00, according to OSHA.
What Does Workers’ Comp Cover for Contractors?
If the above scenario happened and your employee was covered by workers’ comp, your apprentice would receive payment for time lost for work and for medical and rehabilitation services. It even provides death benefits in the unfortunate event of a workplace fatality.
Many states require you to carry workers’ comp insurance for any employee you hire, whether they’re full-time or part-time. Yes, even a single, part-time employee. But even if you’re not required by law to carry this essential coverage, it’s still a good idea to get covered. Because the construction industry is full of physical perils, and your employees are at risk for injury. And your general liability policy most likely excludes employee injuries.
Check out this quick reference sheet from the National Federation of Independent Business (NFIB) for a state by state comparison of workers’ compensation laws to see what your requirements are.
When Does a Contractor Need Workers’ Comp?
So now you know you need workers’ comp if you want to hire employees. But when, exactly, should you get it? Afterall, a new employee could get injured on their very first day on the job.
So what comes first, the employee or the coverage?
According to the Small Business Association (SBA), there are eight steps to hiring your first employee that will ensure you stay compliant with all state and federal regulations. These include:
- Obtain an EIN (employer identification number) from the IRS
- Setup records for withholding taxes
- Verify employee’s eligibility with I-9 form
- Register with your state’s new hire reporting program
- Obtain workers’ compensation insurance
- Post required labor law notices
- File your taxes
- Get organized and stay informed
If you follow the SBA guidelines, you will obtain workers’ compensation insurance before you get your first employee out on the jobsite. As soon as you’ve got a good candidate in mind for your next apprentice, call your insurance provider and let them know you need coverage.
Hiring your first employee is a big responsibility. As your business grows and you need more hands on deck to build a profitable construction business, employees are often a necessity. Be sure that you comply with all state and federal regulations before you bring on your first apprentice, including having workers’ compensation insurance coverage to protect them before they lace up their work boots or pick up their first hammer.