Starting a Business

Do I Owe Subcontractors Health Insurance?

min read
Opinions expressed by Entrepreneur contributors are their own.

Your friend is wrong on both counts. One of the benefits of working for yourself is the independence you gain to work as you please. But because you are not an employee, no one owes you anything. Not even health care. That’s one of the reasons that corporations like to hire independent contractors -- precisely because they DON’T have all of the financial, tax and benefits obligations that they do for their employees. Flip that coin over, and the same rules apply. If you are doing the hiring and you hire other independent providers, you do not need to provide them with health insurance, or any other benefits for that matter.

Here’s where you need to be careful: You must be absolutely clear that you are hiring an independent business owner/independent company as your subcontractor. One way you can gauge the "independence" of a subcontractor is by whether they have other clients (and are not moonlighting from their current job, or "in transition"). Otherwise, you could be deemed to have hired a part-time employee instead of an independent contractor, which can send you "down the rabbit hole." If the state unemployment, disability, or workers' compensation authorities see that you’ve hired a part-time employee without having the proper employee insurances in place, you can get hit with penalties and interest.

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