Building a business from scratch is never easy. Ensuring you handle all aspects of the setup, both small and big, is crucial to the future success of your organization. One particularly important consideration for businesses with employees is the addition of workers compensation within the organization.
Regardless of what the business does, setting up workers compensation will protect the organization from being sued in the future while also keeping employees safe.
What is Workers Compensation?
Workers compensation is a specialty type of insurance that provides medical and wage benefits to people who are injured or became seriously ill while at work, as a result of their work. The benefits offered vary from state-to-state, meaning Mississippi workers comp insurance will not be the same as California workers comp insurance in certain ways.
This form of insurance is considered to be a social insurance as it is based on a social contract between the management of an organization and its labor force. Workers compensation is purchased entirely by an organization, not the employees. It’s important to note that health insurance contributions from an employee do not go towards workers compensation, as many tend to get the two terms mixed up.
Is Workers Compensation Required for a Business?
On the state level, workers compensation is required for every business that has an employee base. However, the punishment and penalties for not having workers compensation will vary on a state-by-state basis. For example, a lack of workers compensation in California can result in either a fine of no less than $10,000 or imprisonment for up to one year.
Common Types of Workers Compensation Benefits
Understanding workers compensation insurance revolves around understanding the benefits that employees receive. While the extent of these benefits will vary based on location, these are the primary categories covered:
1. Medical Treatment
An employee who gets injured or falls ill as a result of their work is well within their right to file a worker’s compensation civil claim. This benefit, in particular, requires the plan to pay for their medical treatment including doctor’s appointments, hospital visits, medications, therapy, and even equipment for recovery.
In some cases, an injury may be serious enough where it requires ongoing care for recovery. The workers compensation plan will also typically cover future costs so long as they are associated with the original injury. Additionally, if a new injury forms based off the original injury, the plan may be applicable in regard to paying for costs associated with the new injury.
2. Disability
In certain cases, an injury or illness may be severe enough that it leaves an employee disabled. Workers compensation insurance will come into play for four main categories of disability:
- Temporary total disability: This category refers to an employee who is completely unable to work for a certain period of time but will return to work at full capacity at a later date.
- Temporary partial disability: This form of disability means that the employee can still work, in a limited capacity, but that they are still impacted.
- Permanent total disability: This type of disability means your employee is completely unable to work and can never return to their previous role.
- Permanent partial disability: This means your employee can return to work, but they can’t ever work at the same capacity as before the injury.
3. Rehabilitation
If an employee requires ongoing care such as physical therapy or some other type of rehabilitation over time, it will likely be covered by workers compensation. This insurance can even cover new trainings or certifications that are required to be completed as a result of the injury.
Transferable analysis skills where a former employee focuses on developing new skills to enter another role are also common times workers comp comes into play.
4. Lost Income
Due to some injuries, an employee may need to take time away from work in order to recover. Workers compensation insurance will often provide some compensation due to lost income, but the amount will be specific based on state regulations.
5. Death and Funeral Services
Finally, if an employee loses their life due to an injury on the job or after-the-fact as a result, it can be used to provide benefits to the family. Funeral expenses and lost income are the two most common benefits within this category.
Examples of Accidents Workplace Compensation Covers
Work related injuries are near 5 million on an annual basis, going to show the importance of workers compensation insurance. Whether you’re an employee or employer, recognizing common examples of accidents that qualify for workers compensation can save time or money:
- Hurting your back after falling off a ladder that broke
- Burned by a chemical that splash onto your skin
- Getting hurt in a car accident if you are making deliveries
- Suffering an injury from a workplace machine
- Violence in the workplaces such as shootings, stabbings, beatings, and more may qualify
- General slip accidents
It’s worth noting that there are four primary categories where workers compensation will not come into play: an act of God, common one-time illnesses, preexisting conditions, and contracting ordinary diseases. Additionally, if a worker is injured while committing a crime, starting a fight, while intoxicated, or while having extreme negligence, workers compensation may not be applicable.
Be aware that if you do choose to collect on workers compensation, you will not be able to sue your employer. In some serious enough cases, a lawsuit may be warranted which workers compensation can take away. Educate your workforce on their options in the event they are injured.
Keep Your Workforce Protected
As a business owner, ensuring the safety of your workforce always needs to be a top priority. When setting up your business, it’s imperative that you invest in workers compensation to avoid being sued in the event of a workplace accident. Don’t skip any steps during the formation of your business to ensure you stay successful and operational for years to come.
I like that you talked about how workers’ compensation is required for every business that has an employee base. I saw an infomercial on the TV earlier and it was all about workers’ compensation. It seems getting a workmans comp claim is actually pretty difficult, so most would opt to hire lawyers for it.