Industries with the most workers’ compensation insurance claims are construction, fishing, healthcare, manufacturing, and warehousing. On the surface, workers’ compensation insurance seems to just benefit the employees. This is one reason why many companies only view it as an added (or unnecessary) expense.
Companies, especially the small and medium-sized firms, often grapple with the idea of offering their workers this program. After all, they also need to consider the limited capital and cash flow issues (if any).
According to the Bureau of Labor Statistics, employers incur an average of $43.26 per hour in worker compensation claims. Small businesses may find this risky, and many are unwilling to invest in such a program. If you’re also sitting on the fence, this article will help you.
We will discuss three compelling reasons why small businesses must offer their employees a workers’ compensation scheme.
Legal Protection
The very first benefit of having a workers’ compensation scheme in place is the legal protection it offers. No matter how scrupulous an organization’s practices are, work-related injuries can happen.
The International Labor Organization (ILO) reveals the sad worldwide figures – 160 million annual victims of occupational injuries with an average of 6,000 deaths daily.
Employers (regardless of their business size) have a legal obligation towards their workers – to ensure their well-being and safety. Besides Texas, every US state makes it mandatory for employers to make workers’ compensation provisions.
The regulations and penalties in this regard vary from state to state. If an employer fails to offer workers compensation, they are vulnerable to hefty fines or employee lawsuits. Not to mention this will tarnish their market reputation to a certain degree.
Moreover, the employer’s personal health insurance will not cover any work-related injuries. According to Western Republic Insurance Services, a reliable insurer will offer custom coverage through a commercial portfolio, including property damage, workplace accidents, professional liability, and vehicular accidents.
With a custom scheme, small businesses do not waste their resources and enjoy legal protection. This may include safety from –
- Stop-Work Orders – You may have to discontinue your firm’s operations until a proper policy is in place.
- Fines – This may cost thousands of dollars based on the state.
- Jail Time – Depending on whether the state considers the absence of workers’ compensation a felony or misdemeanor, you may be sentenced to jail time.
- Legal Fees – These include the lawyer’s fees and court costs.
- Settlements – The amount you must pay to settle lawsuits out of court.
Protection for Business Finances
Businesses that do not have an established workers’ compensation scheme will be financially responsible for any occupational injuries. In most states, even sole proprietors must take responsibility for any staff members they wish to add.
The costs associated with such incidents can be exorbitant (as aforementioned). It is best to fare on the safe side so that your company’s capital and budget remain intact. Some employers have learned their lesson the hard way as even their personal savings took a hit.
Depending on the custom coverage, the workers comp insurance will cover the following expenses –
- Replacement Wages – are the wages your employee loses during the recovery period.
- Death Benefits – for the family of the deceased employee.
- Medical Bills – which include expenses pertaining to hospital stays, medications, surgeries, etc.
- Disability Support – for the employee in case they’re unable to resume work.
Employee Trust
The third benefit of providing your employees with workers’ compensation insurance has to do with trust. Employees wish to know that they’re valued, and such a scheme reassures them of it. This benefit could be more challenging to measure, but it is important in light of keeping the business afloat.
Your workers will know that they are protected, and in case of any misfortune, even their family will receive benefits. A workplace that treats its employees like the assets they are will promote a culture of trust and productivity.
This is not to negate the significance of thorough training practices and safety protocols. However, your employees will still have a safety net to fall back on should a mishap take place. This in itself will reduce job stress and nurture a loyal team.
Furthermore, even job applicants may favor your company over the others in the market. After all, if they are involved in risky work, they want to know that their employer has ample safety provisions in place.
This is crucial because, as a small business, you could be competing against enterprise-level organizations for a small talent pool. Plus, many aspirants could be switching jobs from a workplace that offered them these benefits.
Final Thoughts
The State Insurance Regulatory Authority (SIRA) found that 8% of worker compensation claims between 2020-21 were made for psychological injuries. There are so many aspects to take care of when one runs a company.
Be it small or large, firms are under pressure from the law and workers to have a proper policy. With the market becoming more cut-throat than ever, it’s vital for small businesses to walk the extra mile for their employees.
Must Read: Common Risks Faced by Small Businesses and How Insurance Can Help Mitigate Them
