The hospitality industry often brings in entertainers, contractors, and other vendors to enhance the atmosphere of their bar or restaurant. Is the contractor or vendor required to provide their own workers compensation coverage, or is the business liable while they are on the premises? How does this affect the annual workers compensation audit performed by their insurance carrier?
Each state has its own laws governing workers compensation liability requirements for contractors and subcontractors. In most cases, if an employer contracts with a person who does not carry the required workers compensation insurance, the employer is liable for any compensation as though the contractor were a direct employee. Therefore, this payroll information must be obtained and accounted for at the time of an audit.
While completing a workers compensation audit with your insurance carrier, there may be a section that asks you to provide any wages paid to contracted and casual laborers. This section is intended for businesses that utilize individuals who do not work directly for their company but still perform work that is vital to their operation. This can include delivery drivers, cleaners, security personnel, and entertainers, as well as bookkeepers and marketing personnel.
There are a couple things to include when submitting your audit documents:
- You should report the work done by the named individuals. Without this information, the auditor is unable to tell what risk these individuals fall under. If an individual is listed without the type of work performed, the auditor will likely place this individual and their reported wages under the main classification of the policy.
- The full annual cost of the individual’s labor should be listed. If you indicate that you paid $150 per event but don’t include the number of events, then additional communication will need to occur for clarification.
It is also important to note that some individuals and companies you partner with carry their own workers compensation insurance. If you frequently partner with another corporation for security, bookkeeping, etc., consult with this company to acquire a Certificate of Insurance for these individuals. If ICC receives a Certificate of Insurance for a laborer at the time of an audit, the individual’s payroll is excluded, and the insured’s premium will not be impacted by these wages.
Finally, the classifications that the laborers can fall under vary widely. It will depend upon the worker in question, the work they perform, and the risk posed by your business. Most laborers (including entertainers and cleaners) will fall under the main classification found on the policy, with some common exceptions being:
- Security personnel: NCCI has a separate class code (7720) for individuals who perform security work.
- Bookkeepers: Individuals who only perform accounting work for the insured will be considered clerical and be placed under that classification (8810).
In the Food and Beverage Industry, it is quite common for entertainers, security personnel, delivery drivers, and other contractors to contribute significantly to the insured’s operation. Keeping records of these contractors or vendors, the work performed, and the amount paid will ensure the audit process goes quicker and smoother when the time comes up. Any questions about ICC’s workers compensation audit can be directed to PremiumAudit@ilcasco.com.
