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Workers Compensation Insurance

Managing W2 premiums, 1099 audit requirements, and avoiding year-end backfill charges.

W2 employees paid through Gusto are subject to workers' compensation charges per pay period. While our current "pay-as-you-go" system also processes charges for 1099 independent contractors with each payment, there are critical audit rules that programs must follow to avoid unexpected costs.

 

⚠️ Important: Audit Risks for Independent Contractors (1099s)

Even with pay-as-you-go billing, our insurance providers conduct annual audits to ensure all workers (including independent contractors) are covered.

 

If an independent contractor does not provide a Certificate of Insurance (COI) proving they carry their own Workers' Comp coverage, our insurance company may "backfill" the charge. This means your program will be billed for their coverage at the end of the audit.

  • Variable Rates: The cost of this backfill is not fixed; it varies significantly based on the state where the contractor works and the total amount they were paid.

  • How to Avoid Charges: To waive these costs, you must submit the contractor's COI to support@thenopi.org before the end of the coverage period on 5/2 of each year.

 

Budgeting for Workers Comp

To accurately budget for employees or contractors, please email the following details to support@thenopi.org:

  1. Work Location: The state where the work is performed.

  2. Job Classification: The type of work (e.g., clerical/office vs. manual labor).

  3. Compensation: Anticipated annual salary (W2) or expected total payments (1099).

 

Calculating Your Rates

Workers' Comp rates are calculated over a 12-month period from 5/3 to 5/2. This cycle differs from our standard fiscal year (1/1 – 12/31).

The Formula:

Screenshot 2026-03-10 at 8.25.08 PM

 

  • Step 1: Obtain your state's base rate. (Due to privacy, the Policy Rate Dashboard is only accessible by the NOPI team. Please contact us for your specific rate.)

  • Step 2: Multiply that rate by the total estimated wages/payments for the 5/3 – 5/2 period.

  • Step 3: Divide the result by 100 to find your total cost.

 

Bonus: Email Template for Contractors

If you need to request a certificate from your contractors, feel free to use this:

Subject: Action Required: Certificate of Insurance for [Program Name]

Hi [Contractor Name],

To comply with our annual Workers' Compensation audit, we require a copy of your Certificate of Insurance (COI) showing active Workers' Comp coverage.

Please send a PDF of your certificate to us (and CC support@thenopi.org) by [Date]. If you do not carry your own insurance, please let us know immediately so we can adjust our program's premium budgeting accordingly.