Workers compensation, also known as workers comp, is important for any business. This is an insurance payment to employees if they injure themselves at work and are unable to work for an extended amount of time. However for small businesses, workers compensation can affect them more than a large well established business.
According to the U.S Bureau Statistics of Labour Statistics, there were around 5,486 fatal work injuries in 2022. Thankfully, since 2020, over 135.57 million workers have been covered by worker’s compensation in the USA. In this article we’ll cover what the impact workers compensation has on small businesses. Let’s take a closer look.
Financial Impact
Workers compensation can impact a business financially. Premiums can vary based on a number of factors which include, but aren’t limited to:
- The type of business and industry you’re in
- How many employees you employ
- The claim history of the business
High risk industries tend to be susceptible to higher premiums, especially if they’ve had claims against them in the past. For businesses to improve their financial stand with workers compensation, they need to set up a proper plan and budget. Some of the factors which may help reduce premiums include:
- Training employees well at the beginning, making them understand where the riskiest locations of the business are and how to work safely in those areas
- Implementing safety programs which are followed each day
- Fixing hazardous areas of the business which may prove problematic for future claims
Being proactive to workplace safety will reduce the risk of injuries occurring and also reduce the premiums associated with the insurance.
Compliance and Legal Requirements
Depending on the country and state you live in will determine what laws are enforced. For example, workers comp laws Georgia state there may be pay limitations depending on the circumstances as to why you applied for workers compensation. All regulations generally involve:
- Who should be covered
- The benefits provided
- How the claims are processed
As a business owner you need to comply with the work comp laws related to the state your business resides in. By not complying with these rules and regulations, it can result in heavy penalties which could include:
- Legal action against your business
- High fines
- Closure of your business
- Damaged reputation
- Mass exit of employees
These can all impact a business in one way or another resulting in financial burden. It’s important to do your research about the facts of workers comp.
Employee Relations and Retention
Not having workers compensation coverage can affect your employee relations and overall retention of staff. It can affect your business in the following ways:
- Whether an employee feels safe in the workplace or trusts your business.
- Whether morale is maintained, especially if you run high risk business operations.
- The recruitment process as some individuals may not want to work in a business which doesn’t cover their workers.
- Some staff may not work as hard or try to avoid those high risk jobs causing productivity to drop.
When employees feel safe, they work hard for the company, so it’s good to keep this in mind.
Endnote
Workers compensation may be a costly endeavor for businesses to have, however the overall costs of it outweighs the negative impact your business can face if you’re not covered. When taking out workers compensation insurance for your employees, make sure to compare providers to avoid scams.
