Contractors are required to offer some level of workers’ compensation insurance to their employees in almost every state. Although regulations may vary from state to state, a contractor cannot legally operate a business without providing some form of workers’ comp as a part of an employee package. In states where contractors can opt-out of providing the benefit, their companies are vulnerable to lawsuits that could destroy them financially. Below is an essential guide to the insurance benefit and it protects both you and your workers.
The Basic Groundwork: Contractor Requirements
An employer who takes on four or more workers either full or part-time must offer workers’ comp to every single employee. Although many industries are exempt from this stipulation, most companies in the contracting and home improvement industries fall under the provision. Companies that do not fall under the rule are still encouraged to purchase some plan to cover both them and their workforce for the protection of all involved. In any case, a company that falls under the guidelines may not opt out for any reason. Examples of contractors that have to meet the basic standards are general contractors, roofing companies, HVAC companies, electrical contractors, and some handyman companies.
How Does Workers’ Compensation Insurance Benefit Your Company?
The direct benefit of workers’ compensation is that it covers a portion of an employee’s lost wages and medical expenses if they are injured on-site while working. If a crewmember sustains terminal injuries, the insurance company will pay out compensation for the duration of the employee’s disabilities or disfigurement. Workers’ compensation protects the employer with a no-fault clause so that the contracting firm does not have to pay either 100% or a part of the lost wages. In essence, it limits the contractor’s liability. The Workers’ Compensation Act is designed to aid or protect both parties’. It does not cover any other insurance claims and it is only limited to injuries incurred while on the job. Each state is free to enforce and govern workers’ compensation on its terms. Check your state for how the system is set up.
Are All Employees Covered Under Workers’ Compensation?
Categorically speaking, some employees may not be eligible for the insurance benefit. Under most state regulations a viable candidate would include the following:
- Full-time employees
- Part-time employees
- Those who perform certain jobs that would fall under the state ruling
- Statutory Employees who work for subcontractors under a general contractor in certain conditions
Note: A primary or general contractor is responsible for covering all employees under workers’ compensation if a subcontractor either chooses not to or is not able to provide insurance for their employees.
Something else to remember is that a contracting company may not require any of their staff to pay full or partial insurance. In many states, this is considered illegal.
Can the Owner of a Business be Covered by Workers’ Compensation Insurance Benefits?
A sole proprietor may elect to enroll in workers’ compensation if they can show that they are also an employee of their company. For instance, if a roofing contractor is on the roof with his or her employees working alongside them and performing the same tasks, then the proprietor may apply for the same benefits. The owner must demonstrate that he or she has assigned himself or herself as an employee as well as the sole proprietor.
What Factors Determine How Much the Premiums will be Each Month?
No single variable controls insurance rates. Insurance companies take several items into consideration:
- The size of crew
- The total wages paid out
- The nature of the jobs each employee is performing (rates are different per job description)
- The company’s previous or current accident and claims record
- The overall insurance market at the time. Prices can fluctuate according to the market
What is the Contracting Company’s Role When a Worker is Injured?
The company must help the employee seek immediate medical attention. The employer, NOT the employee is responsible for submitting a claim. The severity of the injury will determine whether or not a worker can make an insurance claim. All State Commissions or Agencies outline to what degree an employer or employee can make a claim.
The type and extent of an injury are where most employers and their workers will disagree. In the case of a disagreement, either the company or the crewmember will request a hearing before a court or a Commissioner. The court case will occur in the county or district in which the injury took place. Either a judge or a State Commission will make the final decision on whether or not to award an employee.
How Much Money is an Injured Worker Compensated?
Since workers’ compensation pays for medical treatment and lost wages during the period of disability, the level of both determines how much is paid out. Some injuries are short-term (a week or less), so an insurance company doesn’t have to pay lost wages, but rather cover medical treatments only. Each state has its statutes.