Workers’ compensation for subcontractors

Some states do not require subcontractors to carry workers’ compensation insurance. In these states, the subcontractors can use the general contractor’s insurance policy for the duration of the job, and the general contractor deducts the cost of coverage from payments to the subcontractor. Check with your state for compliance requirements, as the laws vary in each state.

You can set up the vendor record of a subcontractor with the employer’s compensation rate. When entering the payable invoice, you can charge the subcontractor for coverage based on the invoiced amount. The charge appears as a credit on the subcontractor’s invoice.

The credit does not appear on the Workers’ Compensation report, which only uses data from payroll records. To track and report these costs, it is a good idea to create a separate Workers’ Compensation ledger account.