How Does Workers' Compensation Work?
Workers’ Compensation Insurance works by providing you with the money to cover an employee's medical bills, lost wages, rehabilitation, or death benefits if they are injured on the job. Most people know a Workers’ Comp policy can pay for an employee’s medical expenses from a work injury or illness. But few realize that can include coverage for the injured employee's…
- Medical treatments (surgeries, medications, doctor visits, etc.).
- Replacement wages (lost wages while they are temporarily unable to work).
- Vocational rehabilitation (like physical therapy).
- Death benefits (including funeral expenses and support payments to dependents).
Workman's Comp can also cover your legal expenses if an employee decides to sue you over an occupational injury, illness, or accident. (For more on that, read “How Does Workers’ Comp Protect a Business?”)
And that's not all. Let's see how else Workers' Comp works for your business.
Workers’ Comp 101: How It Works for Your Business
No workplace is completely safe or without risk, even with adequate preparation. And as an employer, you’re required to provide a fair and safe work environment by adhering to EEO guidelines. (See the US Equal Employment Opportunity Commission’s “EEO is the Law” poster [PDF].)
There are plenty of ways for your employees to get hurt, as the following occupational injury stats from the US Bureau of Labor Statistics [PDF] illustrate:
- Slips, trips, and falls account for 15 percent of fatal workplace accidents and 25 percent of all nonfatal workplace injuries.
- Transportation incidents cause 41 percent of work injuries.
- Equipment malfunctions account for 16 percent of incidents.
It's the employer who is ultimately responsible for these injuries, which is why most states require employers to carry Workers’ Compensation coverage. Some states require all businesses to have a policy, regardless of its size or what its employees do. For more on why you need a WC policy, read “What Happens If I Don’t Have Workers’ Compensation Insurance?”
Without proper coverage, you could be paying out-of-pocket for a worker’s medical treatment, as well as hefty state fines. To determine what type of coverage you need, check out our state-by-state guide to Workers' Compensation requirements and talk to your insurance agent.
How Workers' Compensation Insurance Works When You Have a Claim
As soon as an employee is injured or develops an occupational illness, they have to tell you. Each state has a different reporting period. Make sure your employees know they have to report within that period to receive benefits.
What happens after an employee notifies you about a work injury or illness? They should…
- Receive proper paperwork. It's your job to provide the injured employee with information about the claims process, their Workers' Comp benefits, their rights, the appropriate forms, and the business’s insurance details.
- Visit an approved healthcare professional. Your employee should seek medical assistance immediately – any delays can put their benefits at risk. The doctor will provide a medical report to file along with the employee’s injury claim.
- File the claim. Along with any state-mandated paperwork, forms, and medical reports, the employee will file a claim with your insurance company. Pay attention to reporting deadlines. It's also good to know that you may be required to report any workplace injury or illness, even if it’s not eligible for Workers’ Comp benefits.
- Receive benefits. Your insurance provider will either approve or deny the claim. If approved, your employee will receive benefits. Most policies help pay for medical expenses, rehabilitation costs, and two-thirds of their wages if an employee is unable to work for a certain amount of time.
- Return to work. Before an employee returns to work, they may have to submit additional paperwork acknowledging they’re able to work normally. As their employer, you are responsible for “re-training” the employee and taking precautions to prevent similar injuries.
For an in-depth look at the claims process, read “How Do I File a Workers’ Comp Claim?”
How Workers' Compensation Works for Your Employees
A Workers’ Compensation Insurance policy works by saving you from paying employee injury claims out of pocket. But there are steps you can take to minimize the impact of occupational ailments in the first place. Be sure to…
- Offer informational brochures about your Workers' Comp plan. Make these brochures part of your employment packets and training materials when you hire a new employee. Review this information with all employees, especially if your policy changes.
- Conduct regular safety training. Prevent workplace injuries before they happen by reinforcing best safety practices and conduct. Train employees how to properly use equipment and offer appropriate safety or ergonomic gear.
- Keep your door open. Let your employees know that they should come to you with questions. That way, if they have safety or health concerns, you can take corrective measures before someone gets hurt.
To learn more about the importance of communication before and during the claims process, read “How Do I Handle a Workers’ Comp Claim?"