There are many things to keep in mind as your business grows. While you learn to handle consumer demand and production of goods or services, entrepreneurs also have to remember their employees. The people who keep your company open and operating need fair pay and protection on the job, which requires workers’ compensation.
Small business owners may not have experience with workers’ compensation, but it’s an integral part of a functioning company. It’s also a legal requirement in most states, so you might not be able to get your business up and running without it.
Get informed and protected by reading about what your business needs to know about workers’ compensation. You can keep everyone safe by offering this insurance when you fully understand what it covers and why it benefits everyone involved.
What is Workers’ Compensation?
Business owners provide different types of insurance to their full-time and sometimes part-time employees. They likely receive health insurance that covers medical and dental visits. Team members also need the option to file for workers’ compensation, which is a type of employer-provided insurance that covers their lost wages in the case of an injury.
Employees can also file for this compensation if they’re injured on the job and have to pay medical bills after their recovery. In return for offering this coverage no matter where the fault of an injury lies, employees can’t sue their employer for any accidents taken care of under workers’ comp.
Why Businesses Need It
Before 1970, employee safety was up to individual management teams. Nothing was legally required, so if injuries happened on the job, employees didn’t have coverage or the ability to retaliate legally.
In 1970, the federal government passed the Occupational Safety and Health Act (OSHA), which guaranteed a safe work environment and encouraged companies to find solutions to protect their employees from further harm. Workers’ compensation was the result of that effort and became a separate legal requirement in most states as laws passed in the following decades.
Additionally, workers’ comp can save the reputation of a business and ensure its future success. When new applicants discover frequent work-related injuries in news articles or online employee reviews, they’re less likely to seek employment there. Considering that 2.8 million injuries occurred on the job in 2018, it’s likely that every company will have some type of injury happen on company time each year. Everyone wants a safe environment and injuries display a lack of care on the part of the business owner.
Expensive workplace injuries may also cause employees to spend weeks in recovery and potentially not return to their job if they don’t feel safe. It results in an immediate lack of productivity and revenue loss, which builds over time as other employees who feel the same way decide to leave for a safer position somewhere else. Workers’ comp insurance is a preventative, thoughtful gesture on behalf of a business so employees feel valued and thrive.
Where You Can Get It
Entrepreneurs can get workers’ comp from a few different places, depending on where your business operates. Some states direct businesses to private insurance companies. Company managers can browse the various offers and packages to find one with the right price and coverage.
However, four states are monopolistic and provide government-operated workers’ comp insurance — Ohio, Wyoming, North Dakota and Washington. Business owners cannot provide private insurance for workers’ compensation in these states or privately cover employees with a multi-state policy if you employ people across the country.
What to Look For
As you browse potential plans, look for coverage that your business qualifies for. That means knowing the specific laws for your state, the industry your business operates in and how many people you employ. Different sectors may need more extensive coverage if the work is more risky, like a construction company compared to a restaurant.
Small businesses with only a few employees may not qualify for any plans if they are all family. Employees will also get different coverage if they’re domestic or seasonal workers, so watch for the wording of different insurance plans to ensure your employees get the protection they need.
How to Budget for It
The cost of a workers’ comp plan will cost businesses differently, depending on the company’s size and the risk involved in your industry. High-risk companies will pay more for coverage because of the more frequent rate of injury or death. The transportation jobs are in one of the highest-risk industries because they average thousands of deaths each year and make up the largest job sector. Research your specific industry to find out how much annual risk is involved in your work.
It also costs money to report claims before paying anything to cover injuries. Business owners can avoid these costs with a pay-as-you-go plan offered by some private insurance companies. When you sign up for this plan, you’ll pay for the coverage in each payroll instead of a one-lump sum every year.
When to Announce It
Employees deserve a safe workplace on the first day of their job. As soon as you invest in workers’ comp, announce it to current team members immediately so they’re aware of their rights and coverage. New employees should also learn about this provided insurance during their new-hire training. When everyone understands the safety protocols and what they’re responsible for, they’ll have more trust in management and job satisfaction.
Businesses can also take the extra step to display reminders of how to file for workers’ comp by tacking posters in shared spaces. As employees take their break in the kitchen or get extra paper from the supply room, they can glance at the signs and remind themselves about their coverage and rights in case an injury occurs.
Start the Process Today
Companies and employees both benefit from workers’ compensation. Research your options to prepare your business for potential future injuries. With time, you’ll find insurance plans that aren’t too difficult to understand or too expensive to purchase. You’ll navigate the world of workers’ comp and find the best solution for your needs.