Running a successful small business is a challenge in the current globalized economy, especially when one or more of your employees are injured on the job. It not only hinders your productivity but may also lead to expensive workplace injury claims. Despite your best precautions, employees will get hurt on the job.
Unfortunately, most small businesses can neither afford to find a replacement for the injured employee nor have the resources to fight an expensive and time-consuming workplace injury claim.
That’s where the workers’ compensation comes in. It makes the cost of a workplace injury more predictable for the employer and ensures the right medical treatment and swift recovery of lost wages for the employees.
Let’s learn a bit more about workers’ compensation.
1) Workers’ Compensation Explained in Brief
Workers’ compensation is a type of insurance that provides your employees with medical benefits and wage replacement if they suffer a workplace injury, disability, or illness. Usually, it covers the following:
- Wage replacement.
- Cost of medical treatment such as medicines, surgery, hospitalization, therapy, and any other treatment
- Cost of rehabilitation if the accident leads to long-term injury.
- Death benefits, to be paid to your employee’s family members or dependents in the event of their death.
It also protects employers as workers have to give up their right to sue their employer for negligence if they opt for workers’ compensation. Most employees are likely to give up their rights to sue in exchange for guaranteed compensation.
However, workers’ compensation doesn’t cover the following:
- Injuries or illnesses occurring outside of the workplace. For example, a welder can receive compensation if he’s injured on a work-site. But, he is not entitled to it if he gets injured when driving to his work-site.
- Workplace injuries inflicted when committing a crime. For example, you can’t claim compensation if you were injured when stealing from your workplace.
- You can’t claim compensation for self-inflicted injuries or illnesses or even injuries resulting from violating company policy or workplace rules. For example, an employee injured during welding due to not wearing proper protective gear is not entitled to this compensation.
2) Who Regulates Workers’ Compensation?
In the United States, workers’ compensation comes under state regulations. Although the U.S. Department of Labor has the Office of Worker’s Compensation in place, they provide compensation only for federal employees, longshoremen, and coal miners. Every other kind of industry and business falls under state regulations.
The regulations vary significantly from state to state. While some state governments have made it mandatory to provide workers’ compensation, others have made it dependent on the number of employees you have. You may also come across diverse compensation policies for the same type of injuries in two different states.
To get an in-depth view of workers’ compensation in your state, you will need to reach the state’s insurance department. If you ever have to face a workers’ compensation lawsuit or file one yourself, connect with a local attorney. For example, if your business was located in cities like Springfield or Chicago, hiring workers compensation lawyers in Illinois would be the best idea.
3) Where Can You Get It?
As a business owner, you may have purchased general insurance for your business. You can buy a workers’ compensation policy from them. However, you will need to buy it separately. Most private insurance companies also offer cost-competitive workers’ compensation policies.
Sometimes, they may also offer special packages for small businesses. Some states also offer this insurance by the state or both. If you can’t find a suitable private insurer, you can always try a state-owned insurance program.
Alternatively, you can buy workers’ compensation insurance online. It is easier to get quotes for your insurance policy and compare them online. It can help you find a cost-competitive package.
4) Understanding the Cost of Workers’ Compensation
Several different factors such as the size of your business, the number of your employees, the level of occupation risk, and the location of your workplace will affect the cost of your insurance policy. The regulations set by the state and local governments may also affect the cost of your insurance policy.
Depending on these factors, it can cost you as low as 10 cents per $100 of payroll or even exceed $29 per $100. The traditional workers’ compensation insurance models require you to pay a lump sum annually, putting your cash flow management at risk. As a result, buying this insurance is a significant financial concern for most small business owners.
However, pay-as-you-go workers’ compensation can help you avoid lump sum insurance payments. In this model, you pay the premium based on each payroll you run. You can also automate your payments, minimizing the risk of losing the coverage. As this payment is not an estimate, you also end up paying the most accurate cost for the coverage.
5) How Does It Work?
Workers’ compensation comes with two primary obligations:
- Employers have to carry insurance. Failure to do so may result in fines and a personal injury lawsuit by the injured worker.
- Injured employees, on the other hand, must report their injuries to the employer within the stipulated time. The reporting period may vary from time to time.
Once the injury is reported, the injured employee must seek medical treatment immediately from the approved healthcare facility or professional. The employee needs to file the claim as soon as possible after the initial treatment.
As the business owner, it is your responsibility to share the right forms and guide the employee through the claims process, if needed. Once the claim is approved, your employees will start receiving benefits such as medical expenses, rehabilitation costs, and lost wages.
Depending on the recommendation of a medical professional, the employee can return to work. If not, they will get the maximum amount of compensation they are entitled to as per the policy. As an employer, you will be kept in the loop throughout the process.
Having workers’ compensation insurance doesn’t mean your workplace is not safe anymore. It means you are proactively protecting your business as well as your employees should any unfortunate event occur. Just make sure to take a close look at the state and local laws and compare different policies to make sure you are investing in a suitable one. If you ever face any workers’ compensation-related litigations or need legal advice, feel free to drop us an email.