Nearly every business, from the smallest employer to General Motors is required by the federal government to carry worker’s comp insurance.  Most states make purchasing worker’s compensation a requirement; part of the cost of doing business just like having an inventory and an accountant are part of the costs of doing business. How can you satisfy the need to carry worker’s comp and maintain the budget of your small business?

Exceptions to the requirement are sole proprietorships and partnerships. In most situations, these businesses are not required to have worker’s compensation insurance if the owner and co-owners are the only people working for the company.

The actual purpose of worker’s compensation insurance is to protect workers who may become injured or ill while on the job so those employees will not lose a paycheck and will have medical costs covered.   Although the specifics vary to some extent in every state, one thing most businesses feel is some pressure and challenge related to the expense of carrying this insurance.  The insurance protects the employee and can protect the business from going bankrupt if an employee is injured or sick on the job.

Worker’s compensation insurance pays for the coverage of medical expenses, death benefits, lost wages, and vocational rehabilitation.  The biggest benefit of worker’s compensation to the employer is that once an employer begins to receive worker’s compensation for an injury or illness, those benefits are in place until the worker is better.

Because it is impossible to how much an injury or illness will ultimately cost, it would be impossible for a business to make an accurate budget if there were not limitations to the amount money an employer will have to pay for an employee injured on the job.  A company may literally have no worker’s compensation claims, and then have a claim that costs hundreds of thousands of dollars.  With worker’s compensation, the company will know what their own ceiling is while also knowing that the employee will have coverage helping to plan an accurate budget.

Another benefit to the business is that subcontractors and others who come to a work site are covered by worker’s compensation insurance.  The business which has purchased the insurance is responsible for the work site, and without the insurance they might be liable for the subcontractor who is injured on site.

We live in a litigious age and worker’s compensation insurance offers an employer protection against most lawsuits regarding on-the-job-illness and injuries.  In some situations, a lawsuit can drag out long enough that paying legal fees can make a major and negative impact on a business’s bottom line.

Although some businesses complain that paying worker’s compensation insurance is one of the more difficult parts of staying open, the alternative could be devastating.  Better to pay the insurance and avoid fines and penalties, and ensure that employees are taken care of in the event of an accident or similar event at work.

Please contact us if you have further questions.

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