6 Frequently Asked Questions by Small and Start-Up Staffing Companies
Frequently Asked Insurance Questions by Small and Start-Up Staffing Agencies
The American Staffing Association noted that temporary and contract staffing sales totaled $150 billion in 2016 – an increase of 1.8% over 2015. As the industry continues to see steady increases and growth, more and more start-ups and small temp agencies are beginning to enter the market.
Are you looking to jump on this trend and start a staffing agency, or do you currently work at a small, emerging business? Insurance can be a costly component that, if not handled correctly, can make the difference between prosperity or shutting your doors. At Assurance, we partner with many organizations in the small or start-up range, so we’ve compiled a list of commonly asked insurance questions to help you navigate this area of your business.
1. Is it necessary to file my business entity with all states my employees are working in?
In most cases, yes, it’s necessary. Many states require companies to properly file their entities if employees will perform work there; some won’t issue a workers’ compensation policy under your business entity name until that’s completed. You’ll need to check with your local state(s) to confirm.
2. What if I decide to make a placement outside of my niche – or a type of placement I didn’t originally disclose to my insurance broker?
Before making the placement, you’ll need to have a conversation with your broker to confirm that the carrier is comfortable with the placement. It’s possible, based on the position or exposures, that the carrier may not wish to insure this type of placement.
3. What if my estimated workers’ compensation payrolls are different than the actual payrolls?
After your policy expires, your insurance carrier will conduct an audit to validate the payroll was paid out during that policy period. The carrier will then determine if a refund or additional premium is due. Many carriers offer pay-as-you-go workers’ compensation policies, which allow you to pay premiums in real-time based on actual payroll data.
4. Should I sign a contract with a potential client before reviewing the insurance requirements?
No. It’s important to review the insurance requirements since the additional premium could affect your cost of doing business. In addition, you want to ensure the correct insurance limits are in place to avoid a breach of contract with your client.
5. How do I report 1099 (independent contractor) employee payroll to my insurance carrier for general liability, workers’ compensation, etc.?
As a business owner, you’ll be required to obtain a copy of your independent employee’s certificate of insurance outlining the coverages in force (general liability, workers’ compensation, etc.) to ensure their payroll doesn’t get reported under your business operations. Although 1099 employees are typically viewed as self-employed individuals, you’ll still need to obtain a certificate of insurance. Otherwise, that employee’s payroll will become your responsibility, and the carrier will charge additional premiums based on the payroll reported.
6. Are owner’s resume(s), business plans, and applications necessary?
Dust off that college resume and get out your business plan notes, because insurance carriers typically will ask for these documents. As a start-up, there’s no prior history of management, how losses/claims have been handled, etc. for the carrier to review, so they utilize your prior experience in management, the staffing industry, etc. coupled with your business plan to determine the type of risk they’ll be taking on. The supplemental gives them the opportunity to review your projections, the type of placements you’re targeting and what type of management protocols you’re incorporating into your business to determine if you meet their insurable guidelines.
Do you have a question regarding your business that we didn’t cover here? Reach out to a member of the ‘A’ Team – we’re always happy to help.
- What to Expect When Insuring a Staffing Start-Up
- Understanding Employment Practices Liability Insurance for Staffing Companies
- Protect Your Staffing Company Through Buy-Sell Agreements
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