With salaries not being able to keep up with rising living costs, many are choosing to start their own ventures over getting a job. As a result, entrepreneurship is on the rise worldwide. In 2022, about 5,044,748 new businesses were started in the US.
If you are looking to or have just set up a small business, there are many guidelines you have to follow. For instance, all major companies in the U.S. have to provide their employees with workers’ compensation benefits. It ensures companies are taking care of their employees if they are injured on duty.
As a small business owner, you are still required to provide your employees with workers’ compensation insurance to ensure their financial safety in case of injury. Every state in the U.S. mandates that this insurance be provided, with the only exception being Texas.
Factors That Affect Workers’ Compensation Insurance Premiums
As a business owner, you want to make sure your company is doing well, and your employees are thriving. There is, however, a cost attached to providing workers’ compensation insurance. There are a few steps you can take to reduce your costs without compromising the safety of your employees.
There are two broad insurance programs to be considered: Guaranteed Cost programs and Loss-Sensitive programs. With guaranteed cost programs, you pay a flat fee as your insurance premium. With the loss-sensitive program, you pay based on the actual cost incurred during the term.
If your company is making minimal claims, then you might opt for the loss-sensitive programs. Generally, larger companies with low claim rates go for these types of programs as they help ease up-front costs. The downside, however, is that if your claims go up, so do the premiums. It might be a good idea to learn more about these programs before you buy worker’s compensation insurance for your small business.
There are four major pillars of workers’ compensation insurance. Let’s go through them.
Disability Benefits
Disability benefits are intended to provide your employees with financial support in the event that an injury at work causes disability. Based on the severity of the accident and subsequent impact, disability benefits fall into four categories.
- Temporary partial disability: Temporary partial disability takes place when an employee is not able to work at full capacity in the aftermath of a work-related incident. They are still able to carry out some tasks and are expected to return to full capacity over time.
- Temporary total disability: The employee is unable to work in any capacity for a certain period of time but is likely to return to work soon at full capacity.
- Permanent partial disability: Here, an employee is able to eventually return to work, but has to work at reduced capacity indefinitely.
- Permanent total disability: Due to a serious work-related injury, the employee is unable to return to work in any capacity indefinitely.
Prescient National highlights that, unlike physical injury, when it comes to workers’ compensation, mental health claims are a little more convoluted. Some physical injuries can cause mental health issues and are treated separately when compared to claims about only mental trauma. There is no hard and fast rule to be applied here as yet.
Compensation for Wages
Even if expected to return to work soon, an employee suffers financially from a workplace injury if they are not able to work and earn their wages for that time period. To tackle this, companies are required to provide compensation for wages, i.e., a percentage of the employee’s normal salary to make sure they have some income while they recover.
Rehabilitation Benefits
In some cases, a worker might be unable to return to their previous occupation or might require serious training/retraining to do so. Companies are required to ensure that any training or treatments required for the employee to get back to their job are paid for.
If an employee is unable to pick up their previous skill due to a work-related injury, rehabilitation benefits will also help pay for training in a new vocation for the employee.
Benefits for Dependents
Many jobs can involve a high amount of risk. For instance, in 2021, over five thousand people experienced workplace injuries that were fatal. In the unfortunate event that a workplace injury turns fatal, the company is required to provide the employee’s dependents with benefits. These benefits are usually given to the employee’s immediate family – the spouse, children, and elderly parents.
Conclusion
Equipping your business and employees is mandatory in almost all states in the U.S. Additionally, they also provide businesses and employees with much-needed benefits. While employees can be worry-free about the financials if they are injured, companies can help their employees, avoid much higher costs from lawsuits, etc. in the future.