The insurance company uses your estimated payroll for the upcoming year to calculate your Workers’ Compensation premium at the beginning of the policy term. After the policy expires, the insurance company recalculates the premium based upon the actual payroll amount for the policy term, rather than the estimated payroll amount. Should there be a premium difference, the appropriate premium credit or premium charge will be assessed accordingly.
The workers’ compensation payroll should only include gross payroll for full time/part time employees, not independent contractors. The distinction between an employee and an independent contractor is not set in stone; however, independent contractors share some characteristics, including the following:
- Independent contractors typically receive payment in a lump payment or other arrangements. If a person is on the
employer’s payroll and receives a steady paycheck, that person is an employee. - Independent contractors often supply their own equipment, tools, and materials.
- Independent contractors can be discharged at any time and can choose whether to come to work without fear
of losing employment. - Independent contractors usually control their hours of employment.
- Independent contractors often have other jobs and/or employers from whom to depend on for work.
The distinction between independent contractors and employees is increasingly important because of the increased
diligence by the IRS and state agencies to root out instances of misrepresentation. Because employers are not required to
pay workers’ compensation and unemployment taxes to independent contractors, the IRS wants to ensure that all
workers are classified correctly.
Please complete the form below in its entirety. Email Heather Cox with any questions.