Contractors and Workers' Compensation Insurance
Although the general rules for computing Workers' Compensation insurance premiums are the same for contractors as they are for other kinds of employers, there are also some important differences that apply only to those employers who perform construction work.
For one thing, multiple classifications often can be applied to the same worksite (unlike other kinds of employers, where typically a single governing classification applies to all non-clerical or non-sales work).
For those in the construction classifications, the payroll of a single employee can even be divided between more than one classification code (and thus more than one rate) as long as accurate payroll records are kept that allow exact allocation of payroll among the different classifications. Estimates are not acceptable.
That is, it will generally not be accepted by your insurance company if you estimate that 10% of the worker' time is spent in one kind of work, such as painting, and the rest of his time is spent in carpentry.
Records of exact time spent in each kind of work must be kept.
Many states, also have a special premium credit, called a contractor's credit, that can reduce premiums if the employer's average hourly wage is relatively high.
Unlike the experience modification factor, however, this credit is not calculated automatically for an employer. To obtain it, the employer must fill out a payroll report and send it down to the appropriate rating bureau, like NCCI.
Contractors are also much more vulnerable to what we call Shock Audits--where the -premium billed by the insurance company, after the annual audit, is much, much higher than the policy indicated.
We specialize in helping contractors dispute these Shock Audits.
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