The Small Business Owner’s Guide to Workers’ Compensation

What is worker’s compensation?

Injuries used to throw workers into poverty because they lost their ability to work while facing steep medical bills. A worker could in theory sue their employer, but that cost money most didn’t have. And the employer might not have it, either. The solution was making worker’s compensation mandatory for employers. They pay premiums, and the money is available to pay the medical bills and wages of the disabled.

When Do I Need Worker’s Compensation?

Worker’s compensation is required as soon as you hire employees. This includes your first assistant. Larger firms have a larger worker’s compensation because the bill is proportional to headcount. Worker’s compensation premiums for employers are also dependent on the risk the workers face. This is why construction firms pay far more than financial firms. A bank’s employees might suffer a trip and fall accident or repetitive stress injury, but construction employees face greater threats. For example, they might be hit by a forklift or fall off the roof of a three-story building. Then there are long-term risks like asbestos exposure renovating old buildings and breathing in toxic fumes when welding or painting.

How Does Worker’s Compensation Relate to Other Insurance I May Have or Need?

Worker’s compensation is independent of the health insurance you may offer to employees. Employees shouldn’t have to pay for injuries they suffered when doing their job. That’s why they need assistance getting compensation instead of paying for doctor’s visits out of savings. Worker’s compensation is separate from liability insurance a business may cover. For example, worker’s compensation may pay the medical bills for someone falling through a ceiling, but it won’t pay to repair the damage to the customer’s building. Liability insurance will cover losses because someone took shortcuts and damaged the customer’s home.

Some types of insurance dovetail with each other. For example, commercial auto insurance and worker’s compensation may both be involved when a commercial driver is in an accident. The worker’s compensation will cover the employee’s injuries if the accident is not due to reckless driving. The commercial auto insurance policy will pay to repair the vehicle and possibly the medical bills of the other party involved in the accident.

When Is the Employee Exempt from Worker’s Compensation?

Did the employee intentionally violate safety procedures? When someone is engaging in pranks or horseplay in violation of the rules, the courts often find it is their fault. Then they’re left with the medical bills and lost wages. However, if someone removed safety guards to get a loose item because the boss told them to retrieve it, they’re owed worker’s compensation if injured.

Contractors generally don’t receive worker’s compensation insurance, though they may be able to pursue a personal injury claim against the company. Your customers aren’t eligible for worker’s compensation, but they can file a personal injury case.


What Does the Worker’s Compensation Cover?

We’ve already mentioned that it can pay for work-related medical bills. It may pay disability pay while someone is out of work. It can also pay the difference between the person’s prior salary and what they are making in a restricted role. Worker’s compensation may pay permanent disability benefits if the injury is severe enough. And it can pay a modest death benefit when the accident is fatal.

Dragan Sutevski

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan