Your employees are an integral part of your business. That’s why it’s so important to ensure they remain safe while completing their duties on the job. It’s best to learn about workers’ compensation so that you are prepared should you ever need it. Workers’ compensation helps to protect both the employees and the employer if an injury or illness occurs as a result of the job.
What Is Workers’ Compensation?
Workers' compensation, also referred to as workers’ comp, is a type of accident insurance that is paid by employers. There are no payroll deductions for employees that are taken out of their salaries. The benefits of workers’ comp are paid by either a private insurance company or a state-run workers’ compensation fund depending on what kind of insurance the employer has.
If an employee is injured while working or contracts a work-related illness, then workers’ compensation covers his medical expenses. If the injured worker is no longer able to work due to his work-related injury or illness, then workers’ compensation covers his lost wages until he can get back on the job.
The U.S. Department of Labor does not regulate or handle workers’ comp claims for private businesses, as it’s overseen by each state. For questions on how workers’ compensation is handled in your state, go to the U.S. Department of Labor’s state workers’ compensation officials webpage to get the contact information of the office that handles cases in your state.
Not all employees qualify for state workers’ compensation insurance. If an employee is covered by another compensation law that is administered federally, then she likely won’t qualify for state insurance. The Department of Labor Office of Workers’ Compensation Programs oversees four programs for specific employee groups: Energy Employees Occupation Illness Compensation Program, Federal Employees’ Compensation Program, Longshore and Harbor Workers’ Compensation Program and Black Lung Benefits Program. These separate programs offer similar wage replacement, medical cost coverage and other benefits to employees.
Employer Requirements for Workers’ Compensation
Most states require all employers to carry workers’ compensation insurance. State laws have differing regulations for which employees are covered, the types of injuries and illnesses that are covered and the length of time an employee has to file a claim. Some states also have different rules for which injuries are not covered, such as self-inflicted injuries or injuries involving drugs or alcohol. Some states exclude certain types of workers, such as farm workers, domestic workers, casual workers and family members who work in the business.
In order to meet your state's requirements, you have to ensure that you have the minimum amount of coverage required by your state. In some cases, you can self-insure as well. Most often, businesses take part in the state-run workers’ compensation program. There are also a number of private insurance companies that employers can use as an alternative to the state-run program.
How Workers’ Compensation Insurance Works for Employers
The premium that the employer pays for workers’ compensation insurance is calculated based on the industry. For example, if you’re in a dangerous industry where employees are more likely to be injured or ill as a result of work, then your premiums may be higher than a business that is in a relatively safe industry. Other factors that affect the cost of coverage include the number of employees and the location of the business.
In addition to the premiums, business owners also need to pay the administrative costs of handling claims. Employers are also responsible for reporting to the state-run program or private insurer. Keep in mind that if an employee is injured and cannot work, the employer will lose productivity and may have to pay for a temporary employee as well. Employees do not cover any of the costs for workers’ compensation claims.
What Workers’ Compensation Covers for Employees
When an employee is injured at work, workers’ compensation pays for the medical treatment required for the injury or illness. If the employee is not able to return to work right away as a result of her injury or illness, then workers’ compensation benefits pay for her wage replacement. If the employee requires vocational rehabilitation so that she can return to work, this is also covered under workers’ compensation. The program also covers death benefits for the employees’ family should the situation arise.
Workplace injuries don’t always happen due to highly unsafe conditions. Sometimes, a workplace injury can take place over a long-term basis, such as when the employee makes repetitive movements as a result of work. This can cause issues like carpal tunnel, which can be very painful and can prevent the employee from doing her job. Some employees can develop chronic conditions due their work environment as well, such as lung issues.
There are some cases where employees can sue employers if they have been injured or made ill on the job, even if the employer has workers’ compensation insurance. If the employer intentionally injured the employee or if the injury or illness occurred when the employee was doing a task outside of the scope of her role, then she may be able to sue the employer.
Ensuring Your Workplace Is Safe for Employees
One of the best ways to control your workers’ compensation costs and ensure that your employees are safe is to talk about safety with your employees at all times. Instead of discussing safety protocols only at management meetings, be sure to discuss the health and safety guidelines with all employees, especially those on the front lines. It’s important that all employees are aware of how to complete their tasks safely.
Be sure to analyze the trends in the kinds of injuries your business has most frequently. If they are related to a specific machine, for example, then it’s vital to review the safety protocols for that device. If you have many slip-and-fall accidents, consider getting nonslip shoes for employees or ensuring the hallway is clear of debris. By knowing your business’s dangerous spots, you can prevent accidents and injuries from occurring.
Examples of Eligible Workers’ Compensation Coverage Cases
It’s important to know what is covered under workers’ compensation and what is not covered. Not only is this useful information for employers but employees should be made aware of this as well. Self-inflicted injuries or injuries that are a result of misconduct (such as fighting) are not eligible. If the employee is injured because he is using alcohol or illegal drugs at work, then his case is also not eligible for workers’ compensation.
Examples of eligible workers’ compensation cases include:
- Repetitive stress injuries, which are sometimes called cumulative trauma disorders or repeated motion injuries, as experienced by an office worker who develops pain in the arms, wrists and hands as a result of typing at a computer all day
- Workplace injury as a result of an accident — for example, a forklift crashing into some shelving because it malfunctioned could injure the driver and bystanders
- Occupational illness as a result of the working conditions, such as a firefighter who inhales asbestos and develops mesothelioma or an employee who works in a loud factory and develops hearing loss
- Emotional or mental stress as a result of workplace conditions, such as a stock broker developing a heart condition due to the stressful work environment. These cases can be difficult to prove because it may not be clear that they are a result of the job alone, but they are recognized by the courts as covered under workers’ compensation insurance.
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Anam Ahmed is a Toronto-based writer and editor with over a decade of experience helping small businesses and entrepreneurs reach new heights. She has experience ghostwriting and editing business books, especially those in the "For Dummies" series, in addition to writing and editing web content for the brand. Anam works as a marketing strategist and copywriter, collaborating with everyone from Fortune 500 companies to start-ups, lifestyle bloggers to professional athletes. As a small business owner herself, she is well-versed in what it takes to run and market a small business. Anam earned an M.A. from the University of Toronto and a B.A.H. from Queen's University. Learn more at www.anamahmed.ca.