Workers’ compensation is a type of business insurance that protects your employees if they get injured or sick while on the job. If you run a business, you’re probably going to need worker’s compensation insurance––it’s a requirement in every U.S. state and in most countries around the world.
Workers’ compensation is a win-win: You’re covered for expensive benefits that your employees might need if they get sick or injured, and your employees can be comfortable knowing that they’re not paying out of pocket if something happens.
Workers’ Compensation: Cheat Sheet
- The exact laws are different everywhere, but you’ll probably need worker’s compensation insurance no matter what. If you’re in the United States, the exceptions to workers’ compensation change by state. If you hire internationally, laws change by country and the regions or states within those countries.
- You’ll probably be purchasing insurance through a private company. A few U.S. states require you to purchase state-funded insurance. But otherwise, private insurance is normally the way to go.
Here’s how workers’ compensation works
When you purchase workers’ compensation insurance, you’re protecting your business and your employees from any injuries or ailments that might be caused from work.
- An obvious example: Your employee gets injured by a piece of heavy equipment at work.
- A less obvious example: Your employee starts having back problems, which are credibly linked to lifting heavy objects at work. If it’s decided that work was the primary cause of your employee’s back problems, it should be covered by workers’ compensation insurance.
And what about mental health? Well, it depends on the specific insurance you’ve purchased. Some plans include coverage for mental health issues, while others do not. Make sure you know this from the start: You should be able to clearly communicate with employees about what they’re covered for.
So what happens if you need to file a claim? Here’s the standard process:
1. Your employee lets you know about a work-related injury or illness.
2. You guide your employee through the paperwork process––ask your insurance provider what they’ll need to fill out.
3. You submit paperwork and file a claim with the insurance provider.
4. The insurance provider decides whether to approve or deny the claim.
If your claim gets denied
If you’ve done everything right, the claims should get accepted. But claims do get denied, and these are the main reasons why:
- You’ve waited too long to file a claim. Your employee generally needs to let you know within a month or two of their injury, and you should also let the insurance company know about it ASAP. If you wait too long, it’s likely the claim will get denied.
- There’s not enough evidence that the injury was caused by work. Workers’ compensation fraud is a big problem, and insurance companies are skeptical if employees try to claim injuries with dubious connections to work.
- There’s something sketchy about your claim. If your employee was drunk or on drugs, if there weren’t any witnesses, if the injury was intentional, or if there’s a difference between the medical records and the accident claim, the claim will normally get denied.
But, as long as everything is above board and you’ve followed your state and insurer’s procedures, you should be set. Now let’s look at what workers’ compensation will actually cover.
What workers’ compensation covers
The specific benefits of workers’ compensation change with each case. But, there are a few main categories that your claims will likely fit into. These are the big ones:
- Medical bills and expenses.
- Coverage for lost wages as a result of work-caused injury or illness.
- Funeral costs.
- Disability benefits and rehabilitation costs.
Avoiding workers’ compensation fraud
When an employee or employer lies to get payments from workers’ compensation insurance, they’re committing workers’ compensation fraud. It’s a huge deal, and it’s one of the reasons that valid claims can sometimes get denied. Insurance companies are picky.
There are two types of workers’ compensation fraud:
- Employer-related fraud: Some business owners, who want to avoid paying workers’ compensation insurance premiums, will misclassify employees as independent contractors. It’s illegal and can result in big penalties––learn more about worker classification here.
- Employee-related fraud: When an employee fakes an injury or lies on reports to get payments from workers’ compensation insurance, they’re committing fraud.
Businesses can avoid fraud by properly classifying their employees, reading up on state and territory laws, and purchasing the proper insurance. With employees, it’s trickier––telling people not to lie isn’t always a great deterrent. Instead, be as rigorous as possible when verified accident reports and medical claims.
If someone says they got injured on the job, make sure they really did.
If you’re hiring internationally, it’s different
Reading up on the workers’ compensation laws in each U.S. state is straightforward. And, most states have similar rules. But if you’re hiring internationally, it can be more difficult to learn what you’ll really need to do for compliance.
At Panther, we make it easy to hire internationally in just a couple of clicks. If you want to access the global pool of talent, click here and learn more.