Workers’ Compensation is the flagship insurance coverage to protect your employees from workplace injuries and your business from subsequent litigation and medical expenses.
Almost all states require you to have workers’ compensation insurance from the day you hire your first employee. It covers everything from your employees’ medical expenses to legal fees and even death benefits in the event of a fatal workplace injury.
FROM average worker claim reaching $40,000, this is the type of coverage you can’t afford to miss out on. So, here are the consequences of the decision to dispense with workers’ compensation.
How Workers Compensation Works in the US
Each state has its own rules about when and whether you need to pay workers’ compensation. However, all states will require some form of insurance, with the exception of Texas.
Texas is the only state where workers’ compensation is not required, but most businesses voluntarily implement the current policy.
Coverage and rules will vary greatly by state. For example, Georgia requires that you only have insurance after reaching a certain number of employees. Others base their decision on the type of business and the workers involved. However, some states require that you carry workers’ compensation after you first hire, whether part-time or full-time.
You must understand the laws of your state. Then, consult with an employment law attorney to find out what your obligations are.
Also read: A day in the life of a lawyer
The cost of workers’ compensation
Many entrepreneurs find that they can get by without the extra expense of a workers’ compensation policy. However, at the time of this writing, the average compensation rates for workers relatively low compared to the total cost of medical and legal fees directly from your bank account.
Typically, most small businesses can expect to pay less than $1,000 per year to take advantage of this basic type of business coverage.
Governments are increasingly cracking down on businesses that fail to compensate workers when appropriate. Administrative fines are significant, that is, it makes no sense to take risks, not to compensate workers.
Penalties for failure to comply with workers’ compensation
As with individual employee compensation laws, penalties also vary by state. Some states even threaten employers with jail time for failing to comply with workers’ compensation rules.
Some of the states where business owners have been jailed for counterfeiting this coverage include:
Most fines range from $1,000 to $10,000 or more, depending on the state. New Jersey is known for being strict, with five-figure fines and 18-month jail time for businesses that break the law.
Compare average premiums of $400 to $800 a year for workers’ compensation, and steep fines make a bad investment to try and stay under the radar by not buying coverage.
Read also: How does a car injury help?
Implications for business of the absence of workers’ compensation
Government fines are one thing, but there are other consequences of not having workers’ compensation insurance that is directly related to your business.
Workers who are injured on the job are more likely to file lawsuits against their employers. In the worst case, it could even lead to a class action lawsuit.
Fighting lawsuits can absorb thousands of dollars in legal fees and final settlements. But, unfortunately, most small businesses lack the resources to directly cover legal costs, fees, and benefits for injured workers.
Small companies can be devastated by the cost of a single lawsuit. However, none of them take into account the long-term consequences of loss of reputation. In today’s world, reputation is everything, and not caring about your employees can ruin the way people treat you forever.
You can’t buy workers’ compensation insurance retroactively, so is it worth the risk?
Risk avoidance through workers’ compensation insurance
Business owners’ main claim to workers’ compensation has to do with scaling costs. Numerous economic studies disclosed that large companies spend nearly 2% of their operating expenses on insurance premiums alone.
To counter the massive costs of doing business and rising insurance premiums, it may be tempting to forego this coverage entirely, especially if you are not legally required to have it.
Understand that workers’ compensation insurance is not a benefit solely for your employees. Instead, it provides business benefits to you as the owner.
Even a relatively minor accident, where someone falls on a wet floor and sprains their ankle, can cost thousands. Each incident will require you to pay medical expenses, recover lost wages, and cover legal fees if the victim decides to go to court.
Any reputable company knows that the cost of monthly insurance premiums is a small price to pay compared to the potential bill associated with being caught short.
Attract the brightest and best
The cost of medical care in the US has been a hot topic for many years. However, more than half of the country already receives health insurance through their employer. To attract talented employees in a highly competitive economy, you must show that you care about them.
Employees who know they have few remedies if they are injured on the job are unlikely to want to work for you.
Workplace benefits are a vital aspect of attracting the talent you need. However, compared to the difference one talented employee can make to an organization, monthly insurance premiums are a relatively small price to pay.
Workers’ compensation laws are complex. The costs of not complying with state laws can be enormous and may even result in a mandatory prison sentence. Hiring an employment lawyer who can tell you about your obligations is a course of action that can pay dividends.
Even if you don’t have to withhold workers’ compensation, paying for a policy can be very beneficial because you can still enjoy the same protection.