Owning a small business has many rewards, though owners have big things to worry about. One of the biggest worries is ensuring that your employees are not only paid fully on time but also covered in the event they get hurt on the job.
Federal and state laws require employers to provide workers’ compensation benefits to all employees from the first date of hire. However, as a small business owner, you might be wondering whether your obligations differ compared to large corporate businesses.
Ryan Bruning of Bruning Law Firm warns that not knowing about these obligations for small businesses starting up could land them in hot water down the road. Read on to learn about what you should know in order to stay compliant.
Understanding the Key Requirements for Workers’ Compensation
Every state has specific requirements for workers’ compensation to be held by small business owners. In Missouri, the law specifies that you must have this coverage in place if you have five or more employees. There is an exception to this rule for the construction industry where even having just one or more employees requires you to hold this coverage.
Employees can be full-time, part-time, or seasonal. They can also be your own family members. Unlike medical benefits that are accessible after a certain amount of time employed, workers’ compensation coverage must be provided to all employees from their first start date. This coverage is in place to help them should they become hurt in an accident in the workplace or while conducting the duties of their job. It also covers repetitive stress injuries that develop over time, such as carpal tunnel syndrome, or illnesses directly caused by hazardous or toxic exposure at work.
What Does Workers’ Compensation Cover?
Workers’ compensation coverage provides benefits to employees when they are hurt or exposed to toxic agents that cause them to experience a chronic illness. Through this coverage, an employee should get:
Medical Bill Coverage
All medical treatments needed for work-related injuries or illnesses are fully covered by workers’ comp.
Partial Wage Replacement
This coverage also compensates injured employees with partial wage replacement if they can’t work due to their injuries.
Permanent Disability
In more hazardous industries, such as construction, it is possible for an employee to sustain such severe injuries while performing the duties of their job that they are rendered permanently disabled. While it requires extensive proof to receive, employees who can no longer work can receive compensation for these long-term injuries.
Death Benefits
If an employee is either killed instantly in their line or work or succumbs to their injuries, workers’ compensation provides death benefits to their dependents. Surviving family members will receive 66 ⅔% of the average weekly wage and funeral expenses up to $5,000.
Surviving spouses will usually receive payments of ⅔ of their loved one’s average weekly wage for life or until they remarry, though these are capped by state maximums. Minor children will receive these benefits until they turn 18 or 22 if they are enrolled in college.
As a small business owner, you should know that workers’ comp is intended as a trade-off to prevent lawsuits against employers. However, you may see employees who have been injured by third parties filing lawsuits against them.
Your Responsibilities as a Small Business Owner with Workers’ Compensation
If you have 1 to 4 employees and do not work in the construction industry, you are not required to have workers’ compensation. For business owners that meet the state’s requirements for having this coverage, you must make sure you follow all of the rules to avoid penalties.
Post Workers’ Comp Notices in Your Company
You are obligated by law to display notices in your business regarding workers’ compensation coverage. These must be placed in easily accessible areas where employees can’t possibly miss them. The lunch or break room, near the time clock if you have one, or by your main employee entrance are ideal locations.
These posters should also include the workers’ compensation insurance company’s name, policy number, and expiration date. If you have any Spanish speaking employees, make sure you also display this information in Spanish. Failing to post these notices can lead to huge fines, and while you can and should also make sure your employee portal has an easy link or QR code for workers’ comp, the law mandates that physical posters must be hanging at all times in employee-only areas.
Report Injuries Immediately
When a worker gets hurt on the job, they are required to inform you of the incident within 30 days. Once you have been informed of this injury, you must report it to your insurance carrier immediately.
Understand Subcontractor Coverage
If your small business uses subcontractors, make sure each of them has their own insurance before they begin. If they don’t, you could be held liable for their injuries.
Facing Penalties
Small business owners who do not comply will incur significant fines and be exposed to civil lawsuits when employees suffer injuries. You can’t claim ignorance of not knowing you were supposed to have this coverage. If you are not sure whether it applies to you or not, what you need to do, or have questions about ensuring compliance, you can ask an attorney to help ensure you follow all the laws and regulations as required.
How to Get Workers’ Compensation Coverage for Small Businesses
Whether you have a small shop or other business you’ve recently set up, make sure that you are completely covered and ready when you hire employees to assist you. Remember, even if you hire your sister, cousins, or in-laws, they will be considered employees too, and you must follow the rules to avoid pricey penalties that could shut you down before you ever get going.
You can choose private insurance obtained through a licensed agent or company. If you can’t find the right fit, the residual market may be another option. Self-insurance is yet another option though the requirements are strict in terms of meeting the approved financial requirements. Setting up workers’ comp coverage isn’t all that expensive, and paying these small fees for coverage now is greatly preferred to paying out fines and compensation in lawsuits.
