What is workers compensation and what do you need to provide as a business owner? Find out what every small business should know.
WHAT IS WORKERS’ COMP?
Essentially, workers’ compensation is a form of insurance that provides cash benefits or medical care for workers who are injured or become ill on the job. Employers pay for this insurance, and the employees do not have to contribute to the cost of the insurance. If necessary, weekly cash benefits and medical care are paid out by the employer’s insurance carrier as directed by the Workers’ Compensation Board, which varies by state. If Board intervention is necessary, it will determine whether the insurer will reimburse for cash benefits or medical care, and the amounts payable.
The workers’ compensation policy is not in place to determine whether any parties are “at fault.” The amount that a claimant receives is not decreased by his or her carelessness, nor is it increased by the employer’s perceived responsibility for the incident. However, a worker forfeits their rights to compensation if a sustained injury or illness results solely from intoxication on the job, or intent to injure oneself or others.
If both the employer and insurance carrier agree that the injury or illness is work-related, a claim can be paid out. If either party disputes the claim, no cash benefits may be paid until a workers’ compensation judge decides who is right. If a worker is waiting to receive workers’ compensation benefits while the issue is in arbitration, he or she may be eligible for disability benefits in the meantime. Any payments made under the Disability Program will ultimately be subtracted from future workers’ compensation awards.
For workers who can return to work after sustaining illness or injury on the job but are unable to perform their duties at full-strength, they may be entitled to a workers’ compensation benefit that will make up two-thirds of the difference. This includes workers that can return to light work or alternate duties until they are fully healed.
WHICH EMPLOYERS NEED TO PROVIDE WORKERS’ COMPENSATION?
By law, most employers are required to purchase workers’ compensation insurance with just one employee, while in some states the minimum requirement may range from two to five employees. Even if you are a sole-proprietor or self-employed and don’t retain any employees beyond yourself, double-check with state requirements to make sure your business is compliant. Some states will allow sole proprietors to self-insure. Some very large employers may insure themselves, but they must apply with the state and meet strict self-insurance requirements.
Businesses aren’t required to provide workers’ compensation coverage for all types of payments to individuals. In most cases, workers’ comp doesn’t have to cover independent contractors, domestic workers in private homes, or volunteers. Some states also exclude part-time or seasonal workers when the work being done isn’t in line with the employer’s usual business or profession.
Even for employers who aren’t required to buy workers’ compensation insurance, many choose to do so as it fortifies the working relationship with employees and covers all bases in case if injury or illness. Many states allow exempt employers to opt into the system even when it isn’t required, affording businesses extra liability protection.
WHAT ARE THE EMPLOYER’S RESPONSIBILITIES UNDER A WORKERS’ COMPENSATION POLICY?
Employers are required to post information about their workers’ compensation policy that is accessible to all workers while on the job. This should include details about employees’ rights, including their right to receive medical treatment, details about workers’ compensation benefits, and the name and contact information for the company’s workers’ compensation insurance carrier. If the company is self-insured, pertinent information for claim adjustment should be readily available.
Typically, employers must provide injured employees with a workers’ compensation claim form within 24 hours after the employee has given notice of an on-the-job injury or work-related illness. And even if the employee hasn’t given formal notice, the employer may be required to provide forms if they knew about the injury. Employers must also supply the employee with a pamphlet or other form of documentation regarding the employee’s rights to care and reimbursement under the company’s workers’ compensation policy.
If and when an incident arises, employees must report to the company’s designated representative (typically a manager or someone in human resources). The representative should determine whether first aid is required and can be performed on the scene or if additional emergency care is required at a health care facility. Depending on the severity of the injury, the representative may need to notify the employee's emergency contact of the incident. The employer should take immediate action to ensure that the worksite where the incident occurred is safe and secure to prevent additional incidents.
Next the organization files the incident report with the company's workers' compensation carrier. Employers should check with their workers' compensation carrier for the available methods to submit the report.
Organizations must maintain contact with the workers' compensation carrier on the employee's claim. The employer may need to forward medical documentation to the workers' compensation carrier. Moreover, the workers' compensation carrier may have documents for the employer to complete. These documents may request information such as the number of lost workdays, the employee's return-to-work status and any salary continuation to determine wage replacement benefits.
WHAT EXPENSES ARE COVERED UNDER WORKERS’ COMPENSATION?
Depending on the state and policy, workers’ compensation typically provides coverage for medical expenses, missed wages during recovery, lawsuits related to work injuries, and compensation for fatal injuries.
When an accident happens on the job, workers’ compensation insurance covers the cost of immediate care, such as ambulance ride and emergency services. It also helps pay for necessary surgical procedures, medications, hospital stays, and other medical costs. Ongoing care, such as medication and physical rehabilitation, is also covered.
When a serious injury or illness incurred on the job prevents an employee from returning to work as scheduled, workers’ compensation often pays for part of the wages lost while an employee is recovering. For example, if a house painter falls off a ladder while working, breaks his leg and has to take time to recover before getting back to work, the coverage pays out part of the wages he would have received during the period of missed work while he heals.
Workers’ compensation insurance also typically includes employer’s liability insurance, which protects the employer from a lawsuit claiming a worker was injured by the employer’s negligence. If an employee sues, it can help pay for attorney fees, court costs, settlements, etc. If an employee slips and falls on a wet floor and blames the business for failing to post a warning notice, the business’s workers’ compensation policy pays for the costs around going to court and the eventual settlement.
TRUST THE EXPERTS
Nearly every question related to workers’ compensation policies needs to be investigated on an individual basis in order to be answered conclusively. Depending on the state and type of business, the situation varies. Luckily, Payroll Vault is well-versed in assisting a broad spectrum of different types of companies across the country with a variety of business solutions, including payroll, human resources, tax compliance, and workers’ compensation services.
To learn more about what Payroll Vault can do for you and your business, get a quote today.