Running a construction company means being subject to many rules at both the federal and state level. There are employment laws, safety regulations and building standards that you must know and comply with it at all times.

Workers’ compensation insurance sits at an interesting junction among contract obligations, worker rights and workplace safety rules. As a construction company bidding on contracts, you have an interest in keeping your costs low to secure more clients and work. However, you also need to protect yourself from liability and fulfill your obligation to the companies that hire you.

Do you have to provide your subcontractors with workers’ compensation insurance coverage?

Your obligations depend on your formal employment relationships

Construction is an industry that often goes through booms and lulls. Companies sometimes try to keep their costs low by avoiding the obligation that comes from maintaining employees and their salaries. Hiring contractors can be a way to get skilled workers when you need them without the costs associated with standard employment.

If a worker is truly an independent contractor, you may be able to avoid carrying workers’ compensation insurance on their behalf. However, if they are an employee — or if they could successfully convince the courts that they are an employee — you likely need to cover them.

There could also be a clause in your contract with the client that obligates you to insure the workers, regardless of their employment status.

The right insurance protects your business

Workers’ compensation obligations aren’t just an expense that your company should try to minimize. They are also a form of protection that helps you continue to operate even if a worker gets hurt and needs care. Maintaining the right amount of coverage to protect your company from financial losses if there’s a workplace accident could very well benefit your business in the long run.