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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
What Small Business Owners Should Know About Workers’ Compensation
Workers’ compensation insurance exists to provide coverage for employees when they’re injured on the job. It’s an essential part of running a business, but if you’re small or just getting started, it might seem like an unnecessary cost, especially if you’re in a low-risk industry like retail.
Unfortunately, accidents happen all the time, even in the most unlikely of places. For example, an employee could cut themselves with a box cutter or a janitor could slip on a spilled product, causing serious injury.
With an adequate workers’ compensation policy, you’ll have enough money to cover expenses. Without a policy, you could face a personal injury case, which is time-consuming, expensive, and could put you out of business.
Don’t think that you’ll escape workplace accidents. Learn more about workers’ compensation insurance and how it can help your business.
You Have a 50 Percent Chance of Receiving an Injury Claim
A data analysis of workers’ compensation cases showed that small businesses have a 50 percent chance of experiencing a personal injury claim sometime in the next decade. This underscores the importance of being prepared, no matter what.
“Even if you only have one employee, your small business could still be liable for medical bills and lost wages if they are injured while working,” says Haley Bass of Concentra, an enterprise health insurance company. “The financial consequences of a workplace injury are a serious matter, and accidents happen more often than you may think.”
Know Your State and Federal Requirements
The Occupational Safety and Health Administration (OSHA) is the federal organization designed to protect employees. If they experience a workplace injury, they have rules that govern the way businesses of all sizes must handle it.
Research OSHA’s rules regarding worker’s compensation coverage, and then take a look at your state regulations, which will vary.
“In many states a business needs only have one employee to meet the requirement for workers compensation,” reads an article from Business.com. “Coverage requirements can also be dependent on type of business; for example, in Missouri, the law states that for most companies there must be a minimum of five employees before coverage is required, but if that company is in the construction industry, the minimum is one employee.”
You don’t want to mess with legalities. Follow your federal and state regulations, and protect your employees to avoid severe legal repercussions.
Obtaining Workers’ Compensation Insurance
Your state will dictate whether workers’ compensation insurance can be purchased by a private insurance company, by a state company, or by both. You can purchase workers’ compensation insurance separately from your general business owner’s insurance. It can sometimes be bundled with company health insurance.
If you purchase from a state organization, you shouldn’t have to worry about the insurance meeting all the legal requirements for both federal and state. If you purchase from a private institution, examine your policy carefully to ensure that it meets the adequate coverage requirements and will offer the best rates.
Managing the Cost of Premiums
The cost of worker’s compensation varies depending on the risk level of your organization and the number of claims you’ve received. It’s stressful to calculate these numbers, but when you consider the alternative of paying the claim yourself, it’s clearly worthwhile.
The National Council on Compensation Insurance showed that in 2016, the average claim for lost time at work was $29k. It also revealed an average indemnity claim of nearly $24,000, which puts the average claim at about $53,000 total.
That $53,000 will have to come out of your pocket if you aren’t properly insured. The cost of a workers’ compensation policy is nothing in comparison.
Watch for Fraud
Unfortunately, not all employees will remain truthful about a worker’s compensation case. Fraud is not uncommon, and it’s important that you’re prepared in case someone tries to take advantage of your business.
Employers.com produced a whitepaper detailing several signs of worker’s compensation reports, including:
- The filing of reports on Monday morning
- Sudden changes to employment
- Suspicious providers
- No witnesses
- Late reporting
- Conflicting descriptions of the events
“Experience shows that when two or more of these factors are present in a workers’ compensation claim, there is a chance the claim may be fraudulent,” the whitepaper says. “Remember though, that these are simply indicators. Many perfectly legitimate claims are filed on Mondays—and some accidents have no witnesses.”
Keep these things in mind as you navigate creating a safe environment for your employees. Workers’ compensation is an important part of running a successful business.
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