A safety-net for employees and employers alike, workers’ compensation is implemented as a safeguard for the worst case scenarios that take place at work. When a worker gets injured on the job, rather than sue the employer, they can file a claim for compensation with the employer’s insurance company. This is a no-fault benefit system designed to help workers who have become sick or injured as a direct result of tasks performed while working due to work conditions or environment.
What benefits does workers’ compensation provide? If an employee were to get injured, it provides them with medical treatment, payment for time loss and disability, and even re-employment assistance if they need it.
For employees, eligibility for workers’ compensation has two basic requirements:
- You must be an employee of a company that has workers’ comp insurance.
- You must have been injured at work or as a result of job-related activities.
Prior to the implementation of workers’ comp, employees only option was to file a lawsuit with their employers in order to get help with their expenses. For the worker, this either meant no benefits or a long delay. For the employer, it meant possible financial ruin depending on the amount awarded to the worker. Workers’ compensation insurance became the win-win solution to this problem.
To determine whether or not you need workers’ comp insurance, ask yourself the following questions:
Are you an employer?
If you pay someone to work for you, and you are in charge of their day-to-day activities, that worker is probably your employee. If you aren’t in charge of that individual, they are usually referred to as independent contractors.
Are your employees exempt?
Common exceptions that do not require employees to be covered include the following:
Sole proprietors – If you are the sole proprietor you will not need coverage on yourself.
Partners – Partners are not required to cover themselves and are limited to two with both parties being able to make business decisions.
Private residence workers – People working for you at your home are exempt.
Casual labor – If your payroll is less than $500 within any given 30-day period, your workers are considered “casual” and are therefore exempt from workers’ comp coverage.
Some corporate offices – If a corporate office serves on the board of directors and own at least 10 percent of the stock (or an amount equal to the average amount held by all stockholders) it is not required to implement workers’ comp.
Most limited liability company members – Even if the members don’t have substantial ownership, most members are exempt.
Keep in mind that requirements and conditions may vary by state.
Having proper insurance coverage is crucial to your business and the welfare of your workers. Workers’ compensation was put in place to help alleviate the issues that arise from a more traditional approach. In the event of a workplace accident, having the proper program in place will not only benefit the employer but the worker as well.