1099 EMPLOYEE IS AN OXYMORON

If you elect to pay your “employees” on a 1099 basis instead of W2, they then become independent contractors, not employees. Since they are not employees, you don’t have to cover them under your insurance. Two important things to remember about independent contractors is that they must have their own insurances and licenses.

Workers’ compensation is a very significant cost in the operation of a company. Many people choose to exempt themselves to alleviate this cost. As long as you own at least 10% of a business, that is legal. What is less understood is that paying someone as a 1099 “employee” does not make them exempt as a sole proprietor is an employee.

Contractors are required to make sure all sub-contractors have the required workers’ compensation insurance before work begins on a project. If a sub-contractor doesn’t have workers’ compensation insurance for its employees, and remember a sole proprietor is an employee, the employees are then workers under the contractor. So if an injury occurs, you as the contractor are responsible for paying the benefits for the work related injury or illness.

Insurance aside, independent or sub-contractors are required by law to have their own license to do work that requires a license to do. They are now being hired as their own entity, so they must be properly licensed or you are hiring an unlicensed contractor.

If you have any questions about this process or need help with getting your contractor’s license, our team here at Licenses Etc., can help! We make the license application process simple and fast. To contact us and get the process started, click here or call 239-777-1028.