When you started your business, did you envision overseeing a bunch of employees? That’s the height of a successful business. You get to call the shots and lead a team. It’s the reason why so many people start a business.
One of the things that they didn’t envision was the cost to hire employees. There are salaries to be paid, benefits, payroll taxes, and workers compensation insurance. You know how much you can pay in salaries and benefits. It’s easy to estimate what your payroll taxes will be.
How much will workers compensation insurance cost? Do you really need to have it? Is it worth the cost? These are common questions when it comes to workers compensation.
Read on to find out the answers to these questions and more.
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What Is Workers Compensation?
What exactly is workers compensation? It’s a type of insurance policy that you take out to cover your employees if they’re injured on the job. Employees are injured on the job more often than you think on the job, with 2.8 million workplace injuries in 2018.
Even office workers that don’t have seemingly dangerous jobs can get injured at work. Ergonomic injuries, emotional stress, and falls can cause someone to be out of work. Coffee shops and other food and beverage companies need workers compensation insurance, too.
Workers compensation steps in to help employees with medical bills and lost wages due to injuries sustained at work. This is good for the employee and it’s good for your business. Employees essentially can’t sue your business because they’re covered under workers compensation insurance.
Workers compensation is overseen by state laws, but the policies are purchased through private insurance carriers.
When Workers Compensation Is Necessary to Have
You might think that workers compensation is good, but you don’t want to take on the expense. Is workers compensation really necessary? Yes, it is. Most states require businesses to carry workers compensation when they hire an employee.
You want to have a policy in place before you hire the first employee. If you wait and an employee gets hurt during the first few days on the job while you’re waiting for your policy to start, you can open yourself up to lawsuits and other issues.
If you have employees that work remotely, do you still need to have workers compensation insurance? Yes, if they’re your employees and not independent contractors. In some cases, workers compensation insurance will cover injuries sustained in the course of doing business no matter where the injury took place.
It’s up to the employee to prove to the insurance company that the injury happened on the job. This can be difficult to do when someone is working from home. For businesses that have remote employees, you should have a standard policy for telecommuting that includes injuries on the job.
If your business has independent contractors, you don’t need to have workers compensation insurance. You have to be careful here and make sure that you don’t classify your employees as independent contractors to save money. That will result in harsh penalties by the IRS and the Department of Labor.
How Much Does Workers Compensation Cost?
Now that you know that workers compensation is necessary if you want to hire employees, you’re going to want to know the cost of workers compensation insurance.
It turns out that there are dozens of factors that make up the cost of workers compensation insurance. The type of industry, location of the business, and the employees’ wages are part of the cost. We’ll take a look at each one.
The Location of the Business
The location of the business will have one of the largest impacts on workers compensation insurance costs. The cost of living plays a role in that. The states also play a role because they will set a base rate for insurance companies to follow.
The industry you’re in plays a significant role in your cost. Some industries are seen as high-risk, which means you’ll pay more. There’s a higher chance for a construction worker or manufacturing worker to get injured on the job than a writer.
Your state will set the rates of workers compensation insurance costs by industry. That’s to make sure that high-risk businesses are paying an appropriate portion of that risk.
Modifiers and Discounts
Insurance companies will review your company’s history and compare it to other companies in your industry. If your company has an injury rate that’s higher than the industry average, your workers compensation cost will be higher.
You can control your workers compensation insurance rate by putting safety first in your business. Having documented policies and regular training can be a big help in lowering your costs.
This is one of the larger contributing factors that go into the cost of workers compensation insurance. When payroll rates are given, it’s by per $100 of payroll.
For example, a low-risk job would be at a law firm where the work is mostly clerical. The rate could be $.50 per $100 of payroll. If your business has $50,000 in payroll, you’d pay $250 a year in workers compensation insurance.
On the other hand, a high-risk job such as a painter or construction worker could have a rate as high as $10 per $100 of payroll. For $50,000 in payroll, the business would pay $10,000 a year in workers compensation insurance.
It’s important to know the workers compensation insurance laws in your state before you sign up for a policy. The laws can be complicated and only apply to certain industries. You may need to get outside help to make sense of the laws before committing to a policy.
That’s the best way to make sure your business has the right amount of insurance and is protected.
How to Get Workers Compensation Coverage
How do you get workers compensation coverage? As you learned earlier, you have to get workers compensation insurance through a private carrier. It’s not something that you purchase from the state, even though the state regulates it.
Here are a few tips to get the coverage you need.
Get Your Paperwork Together
The first thing you need to do is assess your needs. This will be done with the help of insurance companies, but they can’t do that with limited information. You’ll want to gather your payroll reports, job descriptions, and information about the ownership of the company. Any other documentation such as property inspections or workplace inspections are helpful as well.
You should take the time to shop around for workers compensation insurance. You can compare rates and the level of coverage between carriers. If you already have workers compensation insurance, you should shop around or have your policy reviewed regularly to make sure you’re getting the best coverage and rates.
Find an Agent That Specializes in Your Business
It would be advantageous to find an insurance carrier that specializes in your particular industry. For example, the fitness industry has unique risks such as getting injured on equipment. The food and beverage industry is susceptible to burns and slips and falls.
Working with a carrier that can identify the needs of your workers can also help you develop a policy that covers every possibility.
Look for Claims Approvals
Even though you’re required to have workers compensation insurance, it doesn’t mean that insurance carriers are required to approve claims. All too often, you hear stories of people who were injured at work, and their claims were denied. That can sour your employee relationships and cause your employees to sue the insurance company.
You want to work with an insurance carrier that has a reasonably high rate of claims approvals. You also want to understand what the claims process is. Insurance companies will ask for a lot of documents to prove that the claim is legitimate.
You’re going to file the claim on behalf of the employee and you want to get it right for the employee’s sake.
Workers Compensation Insurance Cost
If you have employees, you need to have workers compensation insurance for your business. Workers Compensation Attorney is regulated by your state, but you have to buy it from an insurance company.
How much does workers compensation insurance cost? It depends on your location, the industry, your payroll amount, and the history of your business. It’s in your best interest to have a worker safety policy and emphasize safety beyond the standard requirements.
If you can keep a relatively clean worker safety record, your costs will come down no matter what industry you’re in. You want to make sure that you shop for a workers compensation policy that’s a good fit for your business needs.