Workers Compensation Insurance...
Over the last few years we have seen more and more pet sitters inquire about workers compensation insurance. Some have hired their first employee, some are considering changing over from independent contractors to employees, and others have just learned their state considers their independent contractor to be an employee, and as such must purchase coverage to comply with their state law. All of the above need the coverage, but unfortunately when many of them hear the cost, they quickly forget about what the insurance is for, and question how they can stay in business if they were to purchase the coverage. Since we rarely hear back from most of these, I assume they either continued on without coverage, took out coverage elsewhere (hopefully), or went out of business.
Workers compensation coverage is compulsory in all states with the exception of Texas. States differ on the number of people you employ. Some states require if you have even 1 employee, while others may say 3 employees. But even if you have less than the number required, you still may be liable for their injuries, as well as suits from the injured employees' family members. In addition, in many states you will find that if your business is taking an order from the client and requesting your Independent Contractor do the work, regardless if you pay them via a 1099, you are indeed responsible for their injuries, as this constitutes an employee/employer relationship. Some states have even added wording to their workers compensation statutes that say failure to have coverage in place due to lack of knowledge is not a valid excuse for failing to insure, and will fine you for being non-compliant. So in this regard, it does appear to be another tax to the business owner(s).
But let's look at what workers compensation insurance actually covers, as unless you have been injured on the job, or had an employee or Independent Contractor suffer an injury, it is likely hard to imagine paying for this coverage. Workers compensation covers all work related injuries arising out of employment and occuring during the course of employment. It also covers occupational diseases resulting from employment, and employers' liability that is excluded from employment. It is the exclusive remedy for work place injuries, meaning the employee relinquishes the right to sue the employer in exchange for a guaranteed set of benefits. Benefits include medical payments, disability (loss of income), rehabilitation and death. Here are a few claims examples with amounts paid:
- Sitter walking client's dog when another dog came up and attacked. Sitter was bitten on the hand by the other dog. Total Paid $10,385.
- Sitter was walking dog when she stepped off curb and fractured her ankle. Total Paid $8,140
- Dog bit sitter on hand as she attempted to place in crate. Total Paid $4,500.
- Dog pulled sitter to the ground and employee landed hard on her shoulder. Total Paid $31,219
- Sitter tripped and broke her wrist while walking client's dog. Total Paid $25,620.
As you can see, these claims can be costly, and if you do not have coverage in place, one bad claim could put you out of business. Yes workers compensation insurance can be expensive, as rates range anywhere from 2% to over 11% of gross payroll depending on the state you live in or on average about 5% of your gross payroll when the correct classification for pet sitting is used.
Unfortunately just as some people cheat on their taxes we also see the same in workers comp. Please be mindful that when you do this by using an improper classification, you not only run the risk of being hit with a large audit bill, but you hurt the entire pet sitting industry. Insurance actuaries set rates based on actual claims experience for the classification compared to premiums paid in. Therefore when pet sitters are incorrectly classified as kennels or vets, premiums that should be applied to pet sitting class are being applied to kennel or vet classification, causing rates in those classes to go down and pet sitting rates to go higher. Most states, (36 of 50), follow rules set by the National Council on Compensation Insurance (NCCI), and utilize classification
0917 (Pet Sitting Services and Drivers) for pet sitters. The other 14 states can vary on the classification. If you want to check the proper classification for your state or obtain a rate quote for your business, please contact our office or your state workers compensation rating bureau. Unfortunately regardless of the cost/tax, workers compensation insurance is the only way to cover you and your employee's injuries while performing your work.