Temporary and contract staffing revenue totaled $152.4 billion in 2023, a 10.5% decrease of the record high number of $159.1 billion in 2022 but aligning closely with figures from 2021*.
When considering opening a staffing agency or an any emerging business for that manner, insurance can be a costly component that, if not handled correctly, can make the difference between prosperity or failure. To assist you in navigating this area of your business, we’ve compiled a list of commonly asked insurance questions by small and start-up staffing agencies:
- Is it necessary to file my business entity with all states my employees are working in?
In most cases, yes. Many states require companies to properly file their entities if employees will perform work there. Some states 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) for confirmation.
- 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. Depending on the position or exposures, the carrier may choose not to insure this type of placement.
- 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 verify the payroll was paid out during the 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, allowing you to pay premiums in real-time based on actual payroll data. You may also adjust your payrolls at any point during the policy term by notifying your broker, which will affect the premium being paid.
- Should I sign a contract with a potential client before reviewing the insurance requirements?
No. It’s important to review the insurance requirements first, as additional premiums could affect your cost of doing business. Additionally, ensuring the correct insurance limits are in place is crucial to avoid a breach of contract with your client.
- 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, failing to obtain a certificate of insurance will make that employee’s payroll your responsibility, and the carrier will charge additional premiums based on the payroll reported.
- 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 and how losses/claims have been handled for the carrier to review, so they utilize your prior experience in management and the staffing industry, along with your business plan, to determine the type of risk they’ll be assuming. The supplemental gives them the opportunity to review your projections, targeted placements, and the type of management protocols you’re incorporating to determine if you meet their insurable guidelines.
Do you have a question regarding your business that we didn’t cover here? Don’t let your insurance be the reason you lose a contract. Reach out to an MMA staffing specialist today; we’re here to assist you with all your staffing insurance needs.
*American Staffing Association (ASA)
