Every company with five or more employees is required to offer workers' compensation to all its employees. Workers' comp, however, could turn into a very big expense, especially if an employee suffered a debilitating or disabling injury. That's why a lot relies on the workers' compensation insurance that a company gets. The insurance policy will determine how much a company can comply with state compensation laws.
Why Get Workers' Compensation Insurance?
The answer is simple: it's the law. Or, more accurately, it's needed so that the law can be followed.
Beyond that, the labor codes in many states impose hefty fines on employers who fail to provide workers' compensation for their injured employees. Those fines are often calculated by using a multiplier on what the employer should have paid out, which can result in huge fines for the smallest infractions. An insurance policy for workers' compensation will improve compliance and thus minimize violations and fines.
Calculating Workers' Compensation Insurance Premiums
Insurance policies for workers' comp work very similarly to the typical policy for, say, cars. There's a base rate for premiums, but the policy's premium can go up or down depending on how much coverage was required in the past year. With cars, the insurance premium goes up every time the insurer has to cover damage from vehicular accidents. It's pretty much the same system for workers' compensation insurance policies.
Companies that had a lot of injured employees - and thus a lot of insurance claims - in the past years can expect to pay higher premiums in the following year. That doesn't mean that a company can't afford to have even a single injury, though. Almost all policies have a threshold for the number and value of claims that can be availed in a year. Only when a company exceeds that limit does the modifier for the premium go up.
How to Minimize Insurance Costs
Whenever possible, companies should pay expenses like medical bills themselves. That way, they won't have to file a claim and their premium modifiers are affected. This will, however, entail a little paperwork as the incident still has to be reported to the insurance company. It's in any company's best interests to keep records updated anyway, especially because insurance for different kinds of employees can be just as different.
Similarly, companies should try to find positions that don't require physical activity, to be filled by the injured or recovering employees. Doing so diminishes claims of loss of ability to work and earn, which in turn reduces how much a company will need to pay an injured employee. That will eventually translate into a very good premium modifier for the next year or so.
It'd be a wise move for any company to hire a specialist who will examine current processes, diagnose potential problems and provide solutions to those problems. That kind of outside advice will go a long way towards making a company's workplace safer for the employees. Efficiency will also be improved so that profits and productivity are maximized.
Workers compensation insurance isn't just a convenience. It's a necessity for almost every company out there that wants to stay in business and comply with the law.
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