Workers Compensation

Worker's Compensation is the insurance against workplace injury, and it covers the damage due to injury by providing monetary benefits to the employee. It saves the interest of both the parties, the employer and the employee. The worker will get the monetary benefit that will cover medical expenses, disability benefits, and even lost income. Also, it will save the employer from being sued as the compensation insurance policy is in place for the benefit of the employees.

• The workers can claim against slip and falls injury at the workplace. However, it should be immediately reported to the management before the statute of limitation runs out; else, it may result in the rejection of the claim.
•  In a construction zone, workers may get struck by an object from a high level; they can claim against these types of injuries.
• A worker may claim injury due to a machinery accident as well. However, these have become lesser since employers tend to implement many safety measures for machinery operators.
• In factory jobs where heavy lifting is required, the workers working for more than ten hours may strain or overexert their muscles. A worker can claim injuries due to overexertion from worker's compensation insurance.

The worker’s compensation insurance scheme provides the below types of benefits:

• Medical Treatments: It covers doctor's appointments, hospital visits, medication, therapy, and recovery equipment during workplace injury.
• Disability Benefits: In the case of temporary disability, the insurance policy can help employees with some of their lost income until they cannot return to work. In the case of permanent disability, the insurer can provide disability benefits for life.
• Rehabilitation: The worker’s insurance can provide ongoing care to the employees concerning physical therapy or rehabilitation.
• Death and Funeral Services: If the employee loses life due to injury at the workplace, some insurance policies can also provide coverage for death and funeral expenses. The limit on the cover for this expense differs from state to state.

The formula to determine the cost of worker's compensation insurance is as follows:

Workers’ Compensation Cost = (Annual Employee Payroll ÷ 100) × Worker’s Compensation Insurance Rate.

For calculating the cost of the insurance as per the above formula, the company will have to determine the following as well:

• Class codes of the employee: It is assigned per the industry and based on the duties and risks involved in the workplace.
• Premium rate: Every class code is assigned with a premium rate.
• Annual payroll of the employee: Finally, determine the annual payroll of the employee before employing the formula.

Employers buy workers’ compensation insurance as a separate insurance policy. Each state in the U.S. has its own rules.

• In some states, employers purchase insurance from the state monopoly insurer.
• And in some states, it is bought from state funds or private insurers.

• The workers' compensation insurance provides help to the injured employees, and till the time it is there, the employer cannot be sued for injury in the workplace.
• The insurance provides no-fault coverage, which means that they will provide coverage for injury happening at the workplace even if the worker is partially responsible for the same.
• The worker's compensation insurance increases the company's brand value, showing that it values its employees.

This article has been a guide to worker's compensation and its definition. Here we discuss how this insurance works along with examples and types. You may learn more about financing from the following articles –

• Unemployment Compensation
• Stock Based Compensation
• Deferred Compensation