Why Workers Comp Insurance is a necessity for Wedding DJs

September 16, 2008 by Andy Ebon

Since your business provides service, on-location, before, during or after a wedding or reception, you should revisit the importance (and requirement) of Workers Compensation Insurance, if you don’t already have it.

There are plenty of misconceptions about what the Internal Revenue Service requires of your business. The IRS regulations that differentiate between independent contractors and employees were updated almost 20 years ago. So it’s odd that there is any question about the requirements.

The purpose of this post is to raise the major business and marketing issues for you to consider.. Ultimately, these are accounting and insurance issues, and you should consult your agents in those professions to get specific advice for your business.

Ancient History: About twenty years ago, and earlier, you could hire a worker occasionally, or part time, and they would generally be classified as an independent contractor. You paid them in full, no tax withholdings were required, and they were responsible for their own tax obligations.

This worked particularly well if you wanted to try someone out for one or two events, or just use them occasionally. One did not have to put them on the payroll. No big deal, from an accounting standpoint.

Today’s World: The rules are radically different. The IRS has a set of 20 guidelines (SS-8 form) that they use to determine whether or not a person should be classified as an employee (or not).

The IRS information page, on this issue. describes the nature of the employer-employee relationship (behavioral, financial, & relationship). The 20 guidelines (available in PDF) give the specific tests that you should use to understand how the IRS might rule, in your situation.

Misconception #1: “My company relationship with a particular individual complies with 12 of the 20 guidelines, so I’m certain I can classify them a a contractor.”

Not exactly. In fact, if even one or two tests indicate that your worker should be classified an employee, then the IRS will likely rule against you. For example, if a worker carries a business card, with their name and your business name on it, then a reasonable person would likely conclude the worker is your employee.

Misconception #2: “I have a written contract with the worker that states that they are an independent contractor and must take care of their own taxes.”

Your agreement does not matter. Agreements and contracts that are contrary to law or regulation or unenforceable.

Essence of the IRS Regulation: The concept is really pretty simple. If you provide control and direction over the execution of the task, if you tell people where to go, what to do, and how to do it, then (in most cases), they are an employee.

Misconception (and argument) #3: “But they provide their own ‘tools of the trade’ and their own vehicle.”

That’s nice, and it’s an argument in favor of independent contractor status, but it does not trump the essence of the IRS guidelines.

The purpose of Worker’s Compensation Insurance: To protect the worker, your company, and the clients you serve, in case of injury. If a worker injures themselves, during the course of work, medical coverage for their injuries is covered, and liability is mitigated (this is the plain English version).

Without Workers Comp, your business, the worker, the venue, and the client are ALL potentially at risk:

Case in point: A worker, representing your company, arrives at a venue, and for the sake of argument, slips, falls, and breaks their wrist.

Aside from the chaos that may be created at the event, it is possible that they will sue the venue and/or the client for a hazardous situation that led to their injury (Oddly enough, if they realize that they should have been an employee, rather than a contractor, they might elect to sue you).

Who wins: No predictions. The court decides or an out-of-court agreement is reached.

Marketing Matters: In this scenario, your relationship with the venue is probably toast. Your contact probably didn’t ask if you only use employees and have them covered by Workers Comp. They assumed that you do. Now, their General Manager has come down on them with full force.

They don’t care if your company provides the most talented and competent people on the planet. They are being sued.

Yet another misconception: “I have Liability Coverage. Won’t that cover it?”

Not likely. Wrong kind of coverage. Your Liability carrier will likely deny coverage because what you SHOULD have is Workers Compensation Insurance.

Do I really have to go through this hassle, and how much will it cost me?: Probably yes, and it will cost you several percent on top of your existing payroll. If you have not set up payroll, until now, you will also have to account for the fact that you have to make a contribution for Unemployment (that is a fund that both the worker and the company contribute to.

But that’s going to raise my expense for workers by 10-15%: Gee, now you have to bear the expense that other legitimate businesses do.

CREATE A MARKETING ADVANTAGE: If, after getting the proper professional advice, you reach the reasonable conclusion that you are not in compliance, and putting your entire business at risk, you will elect to get your employees properly classified.

Now you have bragging rights (so to speak) against your non-compliant low-life competitors (forgetting the fact that you were a non-compliant low-life until this point).

Be proactively in touch with your contacts a venues. Write them a diplomatic letter detailing how your company carries Workers Compensation Insurance to protect not only your workers, but the venue and client, as well. Include a copy of your current coverage.

The key is to clearly communicate that while every company SHOULD do this, many DON’T. Suggest that they ask ALL the vendors to supply a copy of their current coverage, so they can be certain. Since most people who you deal with (particularly at larger companies) are employees, they never deal with these ownership issues. So, usually, they never give it a thought, or assume all businesses are in proper compliance. It’s your job to educate them and make them appropriately uncomfortable.

It’s only a small task for them to send a form letter to all their vendors, asking for documentation. It could save their job.

FINAL THOUGHT: Is this a pain? Somewhat. Is it costly? Sure.

But here’s the deal. You cannot afford to risk your business by sticking your head in the sand. You need to be 100% in compliance, and then turn it into a wedding marketing advantage.

POST SCRIPT: Don’t get sloppy!

Don’t be in compliance and then send out an independent contractor, even if it’s for one event. Being part-time or a casual hiring does not change anything. Even if they work for you just one time, the worker is an employee.

Don’t do everything else, correctly, and then still put your business at risk with the weakest link in your company, a new employee.

Andy Ebon
The Wedding Marketing Blog

Andy Ebon Andy Ebon (78 Posts)

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