Why Startups Shouldn't Skimp On Workers Comp
Jun 07, 2019 11:49 AM EDT
Worker's compensation is an added cost that a lot of startups believe they can skip because it's paying for something that probably won't be necessary. Like all insurance, it's a guarantee in case something happens and workers require compensation because of the company's liability. Bond Street notes that while not every small business has a worker's compensation policy, whether it's legally mandated depends on the state your business exists in. In some states, it's mandatory that companies have worker's comp to cover liability.
Consulting a worker's compensation lawyer in Allentown PA can help you to sort out whether it's a requirement in your state or not. While it might be tempting to avoid paying for a policy you don't think makes sense, it's much better to have all your bases covered than to hope that something won't happen. Playing games of chance should remain at the gambling tables. Worker's compensation should be a part of any startup's initial cost budget, directly because it can save a lot of trouble and money later down the road.
Understanding the Basis of Worker's Compensation
Workplace injuries happen, regardless of whether the worker is in a mine or behind a desk. The National Safety Council (NSC) estimates that a worker is injured once every seven seconds. In the event of a worker becoming injured in the execution of his or her job, worker's compensation is supposed to pay for medical costs of the worker as well as any lost wages that come from an inability to work during their injury. If a worker dies on the job, then the insurance provides death benefits to the family of the deceased worker.
Independent Contractors and Worker's Compensation
While some companies might think that they need to cover independent contractors in their company insurance, the reality is that the company isn't responsible for their injuries. There is a gray area where independent contractors exist. If a company terms an employee an independent contractor, but they are treated with as an employee, including receiving all the benefits that employees receive, then they can be considered an employee regardless of the job description.
If the contractor dictates his or her own hours, supplies their own materials, or provides their services to other companies, then they can't be considered an employee and as such the company doesn't need to cover them under their worker's compensation policy.
The Cost of Worker's Compensation for Startups
There's no standard cost of worker's compensation across the country. The cost varies by state and by the type of work that the employee performs. Companies that have employees that work in low-risk jobs tend to pay less than those who have a much higher risk of being damaged or killed in the line of duty. Young Upstarts mentions that many insurance companies determine the cost of worker's compensation insurance by a scheduling system, which classes employees based on their role within the company. This rate is then used alongside the payroll for that particular role to calculate a final value for policy cost.
What's the Use of Paying for a Policy Like This?
The most common complaint startups have with worker's compensation policies is that they don't think they'll ever use them. The two key benefits that worker's compensation offers to businesses might be an excellent place to start. Firstly, businesses protect themselves from liability suits from employees. Even in states where worker's compensation isn't mandatory under the law, it's safer for a company to cover its bases when it comes to liabilities.
Secondly, if a worker becomes injured on the job, then the company is still liable to pay their wages throughout their absence out of pocket. Sometimes, even if the company is driven to bankruptcy, the owners are still responsible for paying the worker. Having worker's compensation insurance allows for a buffer, allowing the company to be secure in the knowledge that their coverage protects them from liabilities and medical fees of its workers.
Lowering Premiums and Getting the Best Deals
Regardless of the insurance that you need, shopping around is the best bet to land the lowest premiums. The longer a business exists, the more likely it is to get a lower cost. Premiums are calculated from the rate of accidents or injuries while on the job. Lower incidences of these maladies mean a lower premium overall.
To help with this, a company can invest in regular training sessions and OSHA recertification for its employees. Furthermore, companies can lower premiums further by developing a return to work program, which tasks injured employees with jobs that they can manage in their impaired state safely.
Insurance is a Necessity
For many new businesses, these hurdles to creating and growing a business might seem a nuisance, but these barriers exist for a reason. Not only does worker's compensation help protect the livelihood of workers, but it also protects the business from any fallout from expected workplace injuries.
There's no telling what can happen and even the safest employee makes a mistake sometimes. Worker's compensation protects your business against human error and helps to keep it afloat, even though it requires an initial investment to be able to do so.