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What Is Workers’ Compensation?
Workers’ compensation (workers’ comp for short) is an insurance program for businesses that provides benefits for employees who get hurt while at work or ill due to situations at work. Employers pay regular premiums to the insurance provider. Workers submit claims to the provider, who investigates how work-related the illness or injury is and provides benefits as needed. Benefits can help pay for medical care, rehabilitation, lost wages when workers miss work due to injury or illness, or death benefits.
Workers’ comp insurance organizations are administered by the state, and can be private or state-run agencies. Laws vary by state, so it’s important to be aware of how workers’ comp applies to your organization according to the state(s) it resides in.
Workers’ comp protects both employees and employers. Employees are protected with benefits to help make up for loss from workplace injury or illness. Employers are protected in that workers generally give up their right to sue their employer when workers’ comp applies to them.
Workers’ comp is a no-fault system from the employee’s standpoint. Even if workers are careless, they can still qualify for workers’ comp as long as they’re not drunk or high, violating company policy, committing a serious crime, or purposely seeking to hurt themselves or others.
Why It’s Important to Understand Workers’ Comp
Here’s how a solid understanding of workers’ comp can help you and your organization.
- Care for your employees. It’s important that your employees are happy and healthy at work. Workers’ comp reassures your employees that when accidents occur during their regular work duties, they’ll be covered. Without this protection, they may be less inclined to do what’s expected of them.
- Protect the company. Organizations with workers’ comp are more protected against lawsuits from their employees. When injury or illness occurs, there’s an established state-sponsored procedure in place to respond appropriately.
- Stay compliant. State governments require almost all businesses with employees to have a workers’ comp program. You want to make sure your business is compliant with all state and federal laws to avoid fines and penalties.
- Incentivize a safe workplace. More accidents and workers’ comp claims result in higher premiums. These premiums act as an incentive to keep your workplace as free of injury and illness as possible in order to avoid higher workers’ comp costs.
How Much Does Workers’ Compensation Insurance Cost?
Workers’ comp premiums vary by state and business type. Generally, the amounts are determined by categorizing businesses depending on how dangerous the jobs are, the size of the business, and the number of previous claims the business has filed. Workers’ comp systems are built like most insurance systems, where the more risky, accident/illness-prone businesses pay higher premiums.
Are You Required to Have Workers’ Compensation Insurance?
If your organization has employees that aren’t owners, the answer is probably yes. Look into your state’s workers’ comp laws for details.
When to Submit a Workers’ Comp Claim
Here are the two generalized instances when an employee can qualify for workers’ comp. The main question to ask is whether the illness or injury happened as a result of on-the-job exposure.
Injury on the Job
These kinds of injuries can come from single incidents, such as an open wound from a box cutter or a serious burn. Repetitive motion and overuse can also cause serious injury, such as hearing loss or back problems. Pre-existing conditions aggravated by on-the-job exposure do qualify for workers’ comp. Smaller first-aid occurrences (such as requiring a small bandage) don’t require a workers’ comp claim.
Illness or Disease as a Result of On-the-Job Exposure
As with workplace injury, it’s important to distinguish when an illness is caused by on-the-job exposure and when it arises from circumstances outside of work. Illnesses such as heart disease or cancer are not exempt from workers’ comp, but they can be harder to connect to work experiences. Other illnesses are easier to attribute to work experiences, such as heat exhaustion or black lung disease.
How to Manage Workers’ Comp
Here’s the process for HR to follow when an employee needs workers’ comp.
Step 1: Employee Notifies the Employer
Employees must be prompt in notifying their employer (usually HR) when an accident happens. Exact deadlines vary by state. How and when to report an incident should be included in your employee handbook.
Step 2: Seek Medical Attention as Needed
The employer should send the employee to a medical institution if the illness or injury requires immediate attention. Some state laws require the employee to go to a medical provider of the employer’s choosing.
Step 3: Employee Fills Out Workers’ Comp Form
These forms and submission processes are provided by the workers’ comp insurance organization for you to provide the employee. The employee fills them out and gives them back to you.
Step 4: Employer Submits the Claim to Provider
Once you submit the claim, the insurance provider will investigate and offer benefits as they deem appropriate. Employees may dispute benefit amounts or appeal denied claims.
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Brandon is currently a People & Capabilities Advisor at Thiess where he helps implement HR strategies in Salt Lake City and Colorado. He recently graduated with his MHR and MBA at Utah State University, where he also received his bachelor’s degree in Communication Studies with minors in HR, business management, and technical sales management. He has filled professional roles as an HR business partner, an HR generalist, and a senior recruiter; and has exceptional experience in people analytics, compensation, and talent development. Brandon is a strong advocate for HR strategy and helping business leaders understand the true power of maximizing employee potential.
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