Subcontractors
Do I Need to Provide Workers’ Compensation Insurance for My Subcontractors?
Someone needs to have Workers’ Compensation coverage.
Either your subcontractor carries their own policy, or you may be responsible for including them under yours.
If a subcontractor does not have their own Workers’ Compensation policy or proper exemption documentation, their cost may be added to your Workers’ Compensation audit.
Why This Matters
Workers’ Compensation coverage helps protect your business when work-related injuries happen.
It can also help you avoid:
- Unexpected audit charges
- Legal or financial penalties
- Coverage issues after a claim
- Problems caused by missing or incomplete records
The best approach is to collect the right documentation before any subcontractor starts work.
Best Practice: Collect Proof Before Work Begins
Before hiring any subcontractor, ask for one of the following:
- A Certificate of Workers’ Compensation Insurance
- Proper exemption documentation, if they are not required to carry Workers’ Compensation
Keep these documents on file and make sure they cover the dates the subcontractor worked for you.
Why are Certificates of Insurance (COIs) important?
A COI helps verify that your subcontractor actually carries the insurance they claim to have.
Before work begins, verify:
✔ Workers’ Compensation
✔ General Liability
✔ Policy effective dates
✔ Insurance limits
✔ Certificate holder information
If required by your contract, ask for:
- Additional Insured
- Waiver of Subrogation
- Primary & Non-Contributory wording
This ties in perfectly with your checklist.
What If a Subcontractor gets hurt?
If a subcontractor is injured while working for you and they do not have their own Workers’ Compensation insurance (or proper exemption documentation), your Workers’ Compensation policy could end up paying the claim.
In some situations, you could also be responsible for additional premium during your audit.
A 1099 Does Not Automatically Mean Someone Is a Subcontractor
Issuing a 1099 form does not automatically make someone a subcontractor.
For Workers’ Compensation purposes, insurance companies may look at how the person works for your business, not just how they are paid.
Understanding the difference between an employee and a subcontractor can help you avoid misclassification issues and unexpected charges during your Workers’ Compensation audit.
Does My Subcontractor Need General Liability Insurance?
Require General Liability Insurance from every subcontractor.
Workers’ Compensation protects people.
General Liability protects against damage the subcontractor causes to someone else.
Examples:
- They damage a customer’s property.
- A visitor trips over their equipment.
- They accidentally start a fire.
- Their work causes damage after the job is completed.
Without General Liability coverage, the injured party may look to your business for payment.
Employee
A worker may be considered an employee if they:
- Receive regular wages or ongoing pay
- Follow a schedule set by your business
- Have regular or ongoing work available
- Work under your direction or instruction
- Use tools or equipment provided by your business
Subcontractor
A worker may be considered a subcontractor if they:
- Are paid per project or task
- Work under a contract or service agreement
- Set their own schedule within project deadlines
- Work independently and control how the job is performed
- Provide their own tools and equipment
Top 5 Mistakes Business Owners Make
- Hiring subcontractors without getting a current COI.
- Assuming a 1099 worker is automatically a subcontractor.
- Waiting until the audit to collect insurance certificates.
- Accepting expired insurance certificates.
- Not requiring subcontractors to carry the proper insurance.
HTA Tip
Trying to track down subcontractors months later during a Workers’ Compensation audit is one of the most common reasons businesses end up paying additional premium.
What If My Subcontractor Says They Are Exempt?
If a subcontractor says they are exempt from Workers’ Compensation:
- Be careful and do not rely on a verbal explanation
- Ask for documentation showing why they are exempt
- Keep the documentation on file for your audit
- Make sure the documentation applies to the dates they worked for you
- Confirm state-specific requirements, since exemption rules can vary
Without proper documentation, you may be responsible for their Workers’ Compensation exposure during your audit.
Pennsylvania Guidance
In Pennsylvania, the documentation you collect may depend on how the subcontractor’s business is structured.
Preparing for a Smooth Workers’ Compensation Audit
