Worker’s compensation is a type of insurance that covers employee injuries and illnesses which happen on the job, or occur as a direct result of working at a particular job. It is both carried and paid for by the employer.
How does worker’s comp work for employers?
The absolute laws vary by state so it’s important to check your state’s regulations and policies. However, the basics are about the same across the United States. Whether you’re a small business or a large corporation, worker’s compensation is available to protect you and your employees.
Let’s take a look at a few things you need to know about this important coverage in a sea of various types of insurance for your business.
Basic Work Comp Facts You Should Know
If you don’t already pay into federal and/or state worker’s compensation policies, then this article is for you. You need to know what the ramifications of not carrying this type of insurance are.
To be clear, you ARE breaking the law if you are not carrying this coverage.
UNLESS, you are an independent contractors, domestic worker (employees who work from home), or a volunteer. All other employees, however, should be protected. Here’s how it works:
Worker’s Comp Coverage Requirement
As noted, worker’s compensation is required for all employers. The differences that you may find from state to state include types of injuries covered and proof required, excluded injuries, and statutes of limitations. Employer defense claims may also differ depending on which worker’s comp insurance companies they utilize.
There is an option for self-insuring for worker’s compensation although most companies belong to their State Worker’s Compensation Program in order to meet the regulatory minimums.
Paid by Employer
Employees do not contribute to worker’s compensation premiums. This is the sole responsibility of the employer upon signing up for a policy. The cost of worker’s compensation benefits is based on the severity and number of injuries or illnesses that the company experiences as well as the gross payroll for the company.
For an example of how premiums are calculated, consider a professional practice versus a manufacturing company and the types and amount of injuries and illnesses that are caused by job-related duties. It is more likely that the manufacturing company will pay higher premiums.
Covers Employee Injuries and Illnesses
Your worker’s comp insurance carrier will explain the injuries and illnesses covered in your specific policy. For the most part, these policies cover your employees for injuries and illnesses sustained on the job, even over the course of time.
The worker’s comp policy will pay for medical treatments and provide rehabilitation programs to get your employees back to work faster. Lost wages will also be reimbursed. In the dreadful circumstance that your employee should die from the injury or illness, death benefits may also be paid.
When Employees Can Sue
Worker’s compensation provides a barrier between your company and a lawsuit from an injured and disgruntled employee. However, there are some instances when a lawsuit may be unavoidable. For example, if the injury was sustained as a result of something that was outside the scope of the employee’s regular duties, the employer is considered at fault.
With that said, there are some injuries that are completely out of the scope worker’s compensation including self-inflicted injuries, injuries that occurred as the result of a crime, and whether or not the employee violated company policy. Likewise, an employee will not be eligible for worker’s comp if the injury did not happen at work.
Worker’s Compensation Fraud
There are various ways that worker’s comp fraud can occur. From the business side, make sure that you’re always reporting the correct number of employees and payroll. This means making updates when you hire new staff, immediately, or you could face criminal charges and fines.
Not classifying employees correctly can also result in a fraudulent case against you. Don’t misrepresent any staff.
It is against the law to discriminate against an employee for filing a worker’s compensation claim. This applies under both federal and state law in which you are not allowed to fire or retaliate against an employee. Doing so can result in higher premiums, fines, and other penalties as governed under your state’s provisions.
Avoiding Workplace Injuries
Avoiding worker’s compensation claims starts with avoiding workplace injuries. The nature of your business will depend on how you can prevent these instances from occurring. You will need to create an employee safety guide and conduct regular safety training for your staff to reinforce good practices and ensure that employees know how to properly use the equipment required for their duties.
It’s also up to you to provide your employees with all of the information they need to file a worker’s compensation claim upon hiring. Keep it available in a common area at all times and be available to answer questions when they arise.
Ultimately, it’s your responsibility as a business owner to provide worker’s compensation benefits to all of your employees. It’s the law.
Of course, worker’s compensation protects you as well. An employee that is covered by worker’s comp is less likely to take legal action against you or your business thereby saving you time and money in the long term.
If you’re still asking yourself “how does workers comp work,” feel free to contact us. We can explain the process of signing up and help you understand the logistics of a new policy. Not to mention we can go over your current business insurance to be sure that you are properly covered for lawsuits and losses based on your company risks.