Maritime & Offshore Employment: Contractors, Coverage and Confusion
Faststream USA Managing Director Eric Peters defines the risks in hiring contract workers in today’s marine and offshore markets, and lays out the course to mitigating those headaches. Recruitment, insurance and peace of mind – all rolled into one neat package.
Misclassifying Contract Workers Leads to Insurance Confusion
It’s no secret that the marine and offshore worlds require comprehensive insurance coverage in the event of an accident or emergency; however, the complex laws associated with contract workers mean that some employers are unaware of exactly what is needed to ensure their employees are properly covered. Since the easing of most recent recession, one that hit the global marine and offshore industries especially hard, companies have made changes to how they utilize talent in the workplace.
One such emerging trend is the change in personnel models from a fixed to more of a variable cost. This involves utilizing more contract, project and temporary labor. Marine and offshore businesses that employ contract workers could be at risk regarding maritime compliance, workers compensation and liability insurance for these employees. That’s because the importance of correctly classifying employees is at an all time high, especially in light of the changing government regulations regarding the Patient Protection and Affordable Care Act (PPACA) and the Internal Revenue Service’s (IRS) claim to be more vigilant against companies that don’t meet contract employee classification requirements.
As a minimum, misclassifying W-2 employees as 1099 independent contractors may result in unwanted IRS audits that can leave employers responsible for the tax liabilities and penalties. It also can leave employers responsible for paying back taxes and penalties associated with the PPACA if they are found to have misclassified employees.
The dangers of employees not being properly covered are obvious and abundant. Many believe that general liability policies cover every circumstance from A to Z, but this simply isn’t true. Faststream Recruitment Group, a leader in talent sourcing and acquisition, works closely with Hays Insurance, a globally-renown insurance group specializing in marine and offshore liability, to make sure each of the contractors placed is properly covered in order to protect them and the companies with which they work.
Compliance to The Merchant Marine Act, Longshore and Harbor Workers Compensation Act and misclassification of independent contractors are all contributing to the confusion of how insurance cover is laid out for contract workers. One of the most common misconceptions by employers is that paying people on a 1099 basis leaves them exempt from liability claims, but this is completely false. Combine this with the very specific laws on insurance coverage for those working in the marine and offshore fields and the fact that the vast majority of general liability policies do not meet these standards has left some employers confused as to what they need to do. This subject is a concern for many executives in the maritime and oil and gas industries – and they are looking for answers.
Understanding Your Coverage
Understanding comprehensive marine liability insurance first of all involves two basic benchmarks for human resources professionals:
Know the laws: Merchant Marine Act (also known as The Jones Act), Longshore and Harbor Workers Compensation Act and others have had a profound impact on offshore oil and gas and maritime industries when it comes to liability insurance. The laws have very specific requirements for insurance coverage for those working in these fields – and the vast majority of general liability policies do NOT meet these standards.
Employer classification is KEY: One of the most common misconceptions by employers is that they have no “employees” due to their use of contractors and subcontractors. They assume that paying people on a 1099 basis leaves them exempt from liability claims – this is completely false! And the misclassification could cost an employer huge amounts of money in penalties. Also it opens up liability (in the form of lawsuits) to these companies to claims from injured employees.
Mitigate the Compliance Risk
In response, Faststream Recruitment Group, in partnership with marine and offshore specialists Hays Insurance, has developed and designed industry-leading coverage for all types of offshore workers which can mitigate the risk faced by many employers. It works like this: Faststream works with businesses who want to utilize their insurance coverage by employing their contractors directly. This means their workers are fully compliant with U.S. payroll and compliance. Clients gain the liability coverage they need and as an employer they never have to worry about classification, regulatory changes or risks associated with employing these types of people.
You CAN mitigate risk: These days, more and more offshore oil and gas and maritime employees are hired on a contract basis, rather than as full time employees. Most employers are unaware of what coverage their 1099 employees have (and don’t have). On the other hand, and by using a reputable recruitment firm that has all of the required insurance coverage and who directly employs the contractors, companies are able to mitigate risks associated with offshore contractors.
In a nutshell, Faststream addresses these concerns by assuming the compliance risk associated with temporary, temp-to-hire and interim employees. By directly employing contract workers, Faststream eases uncertainty around classification status and assumes all risk for tax liability, insurance (health and liability) and benefits. Not sure if you are misclassifying employees and are at risk of an IRS audit? Click [http://www.irs.gov/taxtopics/tc762.html] to determine the differences between an employee and an independent contractor. Then, consider the option of passing that risk to a trusted partner.
Founded in the United Kingdom in the late 1990’s and perhaps best known as a global recruitment organization specializing in sourcing and supplying hard-to-find candidates for the shipping, maritime, Oil & Gas industries, Faststream also offers comprehensive coverage for all types of offshore workers in the offshore oil and gas and maritime industries. That’s because finding the right talent for the right job is only one part of today’s recruitment challenge. Professional recruitment, insurance and, yes, peace of mind, can be rolled into one secure package.
(As published in the 4Q 2014 edition of Maritime Professional - www.maritimeprofessional.com)
Other stories from Q4 2014 issue
- Shipbuilding’s Dilemma: Good Problems to Have. page: 8
- Powering Ahead with Wind Assist Technologies page: 10
- Energy Sector Volatility Affects Middle Market M&A Activity page: 16
- Maritime Crime Continues at Pace page: 20
- MarPro Profile: Margaret Kaigh Doyle page: 22
- The Impact of LNG Fuel on Commercial Ship Design page: 24
- MarPro Profile: Brian Buckley McAllister page: 30
- Marine Engine Emissions: GE Changes the Conversation page: 33
- Engine Emissions: GE Changes the Conversation page: 33
- Partnerships, Prodding Propel the Ballast Water Treatment Game page: 36
- Just in Time: ABS Ballast Water Treatment Advisory page: 42
- Maritime & Offshore Employment: Contractors, Coverage and Confusion page: 50
- Shipyard Recruitment, Training and Retention Roundtable page: 54