Workers’ compensation insurance safeguards your employees and your organization in event of a job-related injury or disease. However, a claim may still affect your bottom line through greater premiums and overhead expenses.
This type of insurance covers medical expenses and medical treatment for the injured or ill employee. It also provides partial compensation for income losses if they need some time off to recover. Workers’ comp legislation differs by state. However, most state legislation obliges this coverage once you hire your first worker.
Workers’ compensation claims usually have a bigger impact on smaller businesses.
This is because large companies have more funding and bigger payrolls. As a result, they are able to absorb the financial losses more easily. Likewise, large companies are also more likely to have safety training and employees that know how to manage claims.
Furthermore, independent contractors, sole proprietors, and self-employed business owners can benefit from obtaining workers’ comp coverage. These folks might be in financial trouble if an accident at work left them with unpaid healthcare costs. They might even be incapable of earning a living.
So, let’s see below how exactly workers’ compensation insurance really impacts your business.
Workers’ Comp Premiums
Your workers’ compensation insurance premiums will be based on your sector, the number of employed persons, your company’s payroll, and your claims history for the last three years.
A sole claim probably can’t result in higher premiums for your insurance coverage, although it will be dependent on the sort of the claim, the consequent healthcare costs, and any disability allowances. The more workers comp insurance claims you have, and the higher the expense, the more likely your insurance provider will increase your premiums.
Your insurer will also consider your EMR (experience modification rate). In other words, EMR is a standard the industry utilizes when determining premiums. It matches your claims experience to other companies in your sector or category. An EMR of 1.0 is the benchmark average. Any number greater than 1.0 will probably result in higher premiums.
Other factors may involve any complaints, filings, and fines from the OSHA (Occupational Safety and Health Administration), that could affect your premiums. Regular safety training and ensuing safety guidelines for your sector will help you lower your premiums.
Payroll and Efficiency
Workers’ comp benefits may counteract some of an injured employee’s income loss during their recovery process. However, you could end up owing an employee for any loss of income that isn’t covered by workers’ comp insurance.
It’s possible to mitigate that by bringing an employee back to work once they’re able to do so, even in a reduced capacity. That would minimize the remuneration burden on your workers’ comp claim and perhaps avoid a rise in premiums.
Further expenses might include:
- the expense of hiring and training a temporary substitute;
- paying overtime because your other employees engage in additional work; and
- a work halt in case of an investigation by OSHA, state, or industry governors.
It can take a considerable period of time to process a workers’ comp claim.
The insurer will need to examine any evidence concerning the incident, which includes the employee’s medical records. Your organization may need to spend a great deal of time and money to repair any equipment that was broken or found to be faulty as a consequence of the incident.
Some paperwork will also be included when reporting the accident to state and federal governors. This is particularly the case if there’s a potential OSHA infringement. Since regulators can order new equipment or training, that could likewise affect your bottom line.
You can make a decision to fight a workers’ comp case on trial if you think the claim is unlawful.
While your lawyer can counsel you on whether that is the correct approach, bear one thing in mind. If you lose in court your company might end up paying far more in legal expenses than it would have paid if you had settled the claim.
Also bear in mind that only 7% of workers’ comp claims are declined, only 5% of cases stand trial, and companies settle most of their workers’ comp cases out of court.
The possible negative impact on your brand is difficult to imagine.
Reputational harm factors include the intensity of the incident, whether regional news organizations cover it, and whether or not people circulate it on social media.
A high-profile incident, recurring accidents, or OSHA fines could prove disastrous. They might make it difficult for you to hire new employees…or even acquire new clients.
To have a safer and healthier workspace you must follow the industry standards for workplace safety training to help minimize the probability of workplace injuries.
You also need to maintain your equipment to keep it functioning safely. It’s a good idea to form a safety committee or have an appointed employee to ensure your compliance with safety regulations.