Workers’ Compensation 101 for Small Business Owners

As a small business owner, your employee’s safety is likely a top concern. Whether your employees work behind a counter, at a desk, in a warehouse, or wherever, there are risks of injury in almost all lines of work. That’s why workers’ compensation insurance—also often called worker’s comp — is mandatory in most states. 

Understanding worker’s compensation insurance is crucial to protecting both your employees and your business. To help you out, here’s our comprehensive guide to worker’s comp with everything a small business owner needs to know. Let’s dive in! 

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What is workers’ compensation insurance? 

First things first, let's break down what workers' comp actually is. In a nutshell, it's a type of insurance that provides benefits to your employees if they get injured or sick as a direct result of their job. It's like a safety net for your team, covering things like:

• Medical expenses
• Lost wages from missing work
• Ongoing care for serious injuries
• Funeral costs in the worst-case scenario

However, there are circumstances where workers’ comp doesn’t apply.

insurance does not provide coverage, including (but not limited to): 

• Suicide, including injury or illness due to an attempt
• Deliberately not following safety precautions/regulations
• Injuries received outside and not as a result of work
• Participating in illegal activities at work

Typically, when an employee accepts workers’ comp benefits, the employee waives the right to sue their employer for damages.

Lastly, it’s important to note that workers’ comp is primarily handled by each state, and regulations regarding benefits can vary. It’s best to check with your state’s labor or workers’ compensation board to gain a comprehensive understanding of your requirements and benefits. 

Why is workers’ comp important for small businesses?

So, why should you care about workers' comp as a small business owner? For starters, it's required in most states. But more importantly, it shows your team that you've got their back if something goes wrong. And that peace of mind? It's priceless.

Plus, let's be real – accidents happen, even when you're doing everything right. Workers' comp protects you from expensive lawsuits and financial disasters if an employee gets hurt. It's like an invisible shield for your business.

How workers’ compensation applies to your workers.

Coverage for Full-Time and Part-Time Employees

In most cases, workers' comp covers both your full-time and part-time employees. The specifics can vary depending on your state and your business, but generally, if someone's on your payroll, they're eligible for benefits if they get injured on the job.

Full-time employees are generally provided with more comprehensive benefits, including healthcare, paid time off, and other perks. Part-time employees, on the other hand, may receive fewer benefits or none at all, depending on your policies and state regulations. As mentioned, it's important to note that the specifics can vary greatly depending on the state, as well as the nature of your business. 

Coverage for Independent Contractors and Freelancers

Things get a little trickier when it comes to independent contractors and freelancers. Usually, they're not covered by your workers' comp policy. But there are some exceptions, like if your state requires you to cover them or if you've agreed to provide benefits in your contract.

For freelancers, it's important to note that even if they have health insurance, most policies exclude coverage for work-related illnesses and injuries. Therefore, many freelancers opt to take out their own private health insurance or independent contractor workers' comp insurance to ensure that their medical bills will be covered in case they're injured while working. Additionally, some companies may offer temporary employee status to freelancers, entitling them to certain benefits.

If you work with a lot of freelancers, it's worth double-checking your state's rules and considering offering them coverage, even if it's not required. It's a great way to show them you value their work and their well-being.

State-Specific Workers’ Compensation Requirements

Speaking of state rules, workers' comp regulations can vary a TON from state to state. Some states, like California and New York, have super strict requirements and harsh penalties for not providing coverage. Others, like Texas, don't require most employers to have workers' comp at all.

That said, a few states’ workers’ comp rules stand out and are worth noting.

• Ohio: In Ohio, workers’ compensation laws apply to any employee, even those who are hired or work illegally.
• California: California has strict workers’ comp rules with harsh penalties. Employers can face fines of up to $100,000 for not providing workers’ comp insurance, and it’s a criminal offense punishable by a fine of no less than $10,000, up to a year in jail, or both.
• New York: New York also has severe penalties for not providing workers’ comp. For instance, failure to provide workers’ comp for an employer of five or fewer employees can result in a misdemeanor subject to fines between $1,000 and $5,000.
• Illinois: According to Illinois law, any employer who willfully and knowingly fails to provide workers’ comp insurance to his employees may be fined as much as $500 every day.
• Texas: Texas does not currently require most employers to obtain workers’ comp insurance, making it an anomaly. The only exception is private employers who contract with the state government. 

Some states, such as Ohio, North Dakota, Washington, and Wyoming have “monopolies,” meaning they’ve created their own workers’ comp insurance program that is entirely run by the state. 

The best thing you can do is check with your state's Department of Labor or Workers' Compensation Board to get the full scoop on what's required for your business. And if you're feeling overwhelmed, don't worry – we've got a handy list of each state's labor laws and links to their websites right here.

How to manage workers’ compensation with Homebase.

We know workers' comp can be a headache, but that's where Homebase comes in. Our everything app makes managing workers' comp a breeze, so you can focus on running your business. Here's how:

Accurate Employee Classification and Tracking

Homebase makes it easy to classify your team members as full-time, part-time, or independent contractors, and track their hours and wages. This makes it easy to calculate accurate premiums, which are in-part based on worker status and payroll. That means you won’t pay too much—or too little. 

Automated Insurance Integration

Nobody likes data entry, especially busy small business owners like you. There’s no need for that with Homebase’s integration with leading worker's compensation insurance providers. With Homebase, you can automatically sync your employee data with your workers' comp insurance provider, so you're always covered and compliant. Plus, you can get real-time updates on claims right in the app, so you're never out of the loop.

Centralized Documentation and Incident Reporting

Keeping track of all the paperwork for workers' comp claims can be a nightmare. But with Homebase, all your employee records and documents are securely stored in one place, so you can access them anytime, anywhere. And if an incident does happen, Homebase streamlines the reporting process to keep you compliant with state and federal regulations.

Know your responsibilities and don’t get caught uncovered! 

We know workers' comp can feel like just another thing on your never-ending to-do list. But trust us, it's worth the effort to make sure you're properly covered. The penalties for not providing the right insurance can be devastating for a small business, and the cost of coverage is way less than the cost of a fine.

With Homebase in your corner, managing workers' comp doesn't have to be a stress fest. Our app makes it easy to stay compliant, protect your team, and keep your business running smoothly.

Sign up for Homebase and give yourself one less thing to worry about. Your team (and your peace of mind) will thank you!

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