Workers’ Compensation 101: A Guide for Small Business Owners

If you are the owner of a small business, then you know that its success depends almost fully on the employees. This is because, while larger corporations usually have employees that they can allocate in case of a labor shortage, a small business doesn’t have the necessary resources to do so.

So, what responsibilities does a small business have when an employee is injured on the job?

Well, they vary from state to state, but most of them have a law that requires businesses to have a workers’ compensation insurance. Such compensation will help you avoid paying for an employee’s medical bills, as well as any penalties or fines – and even a lawsuit.

Moreover, the workers’ compensation will also pay a part of the employee’s wage while they are in recovery.

Does Your Company Need Workers’ Insurance?

If you are unsure whether your company should carry workers’ insurance or not, here are the indicators that should tell you that it needs to:

  • You have at least one or more employees.
  • Your business or the industry you activate in is associated with certain occupational hazards (construction companies, or those exposed to chemicals, oil, or gas).
  • You are required by law to have workers’ compensation coverage.

Now that you know that you will most certainly need workers’ compensation, it would be helpful for you to know what it does and what it does not cover.

What Does Workers’ Compensation Cover?

Every time an employee becomes sick/ ill due to occupation reasons or gets injured, the insurance coverage will help both the business and the employee. Here are the general things that such compensation covers:

  • Rehabilitation, retraining, as well as therapy
  • Lost wages
  • Medical costs, including surgery, medicine, hospital stays, therapy, and treatments
  • Death benefits which are paid directly to the worker’s dependents, in the event of an employee’s death.

What Does Workers’ Compensation Not Cover?

Here are some cases or conditions that will not be covered by any workers’ compensation:

  • Illnesses or injuries that occurred outside of the workplace
  • Illnesses or Injuries that were self-inflicted
  • Any injuries/ illnesses that occurred while the worker was committing a crime – for example, if an employee gets injured while stealing from work, the worker’s coverage will most likely not cover it.
  • Any injuries/ illnesses that are a result of a violation of company policy – if a worker gets injured/ hurt while violating indoor rules or company policy, they will not be eligible for workers compensation.

How Much Does Workers’ Compensation Cost?

The cost of the worker’s compensation is influenced by the size of your business, the total number of employees, the risk the occupation comes with, and the locations of the workplace.

This is why, before applying for workers’ compensation, it is vital that you research or consult someone experienced in local workers’ compensation laws, in order to know whether such practice is good for your company or if you should look for better alternatives.

In terms of costs, a small-sized business will usually pay around $19 a month per workers’ compensation premiums, while bigger businesses (average or large) can pay between $210 and $290 a month.

The Bottom Line

As a small business, you will most likely want to apply for workers’ compensation and have your employees protected by such insurance at all times. Not only is it required by law in some states, but it can save you a couple of headaches, so to say, when it comes to injuries and illnesses caused by the workplace.

Naturally, remember to check the local laws for workers’ compensation so that you know what you should expect from as well as how much would you pay for it.