Workers’ compensation is a system of insurance that provides financial and medical benefits to employees who suffer work-related injuries or illnesses.
Workers’ compensation insurance is typically mandated by law, and aims to protect both employers and employees by ensuring that injured workers receive necessary support and compensation while limiting the employer’s liability for workplace accidents. The insurance policy also pays death benefits to families of employees who suffer fatal accidents while on the job.
Purpose and benefits of workers’ compensation
Workers’ compensation is an important insurance program that offers several key advantages for both employees and employers.
For employees:
-
Provides financial support and wage replacement for lost wages due to work-related injuries or illnesses
-
Covers medical bills, treatment, and rehabilitation services to help employees recover from their injuries or illnesses
-
Protects from potential job loss by offering job security
-
Reduces litigation as workers’ compensation streamlines the process of resolving injury claims
For employers:
- Maintains legal compliance by adhering to local labor laws
- Reduces liability for workplace injuries or illnesses
- Enhances employee relations by demonstrating a commitment to employee well-being
- Encourages workplace safety incentives to pay reduced insurance premiums
- Provides better financial planning and risk management as workers’ compensation provides employers with predictable costs for handling workplace injuries
Eligibility for workers’ compensation
There are no universal criteria describing eligibility for workers’ compensation. Instead, eligibility for workers’ compensation benefits is determined by specific criteria that vary by jurisdiction.
Below are common factors that establish an individual’s eligibility for these benefits.
- Employment status: The individual must be a full-time or part-time employee and not an independent contractor or volunteer
- Work-related injury: The injury or illness must occur during employment while performing a work-related task
- Timely reporting and statute of limitations: The injury must be reported to the employer or relevant authorities within a specified time frame
- Employment classification: Some jurisdictions dictate specific rules about the minimum number of employees required for a workplace to be covered by workers’ compensation laws
- Cause of injury: Benefits are typically denied if the injury is caused by intentional misconduct, while intoxicated, or with violation of company policies (and some occupational diseases are not covered either)
- Medical evidence: There must be adequate medical evidence supporting the claim
Types of workplace injuries covered by workers’ compensation
While each workplace has its risks, there are a few common workplace injuries and illnesses that are covered by workers’ compensation.
In the US, the Occupational Safety and Health Administration (OSHA) and the National Safety Council (NSC) list the following injuries as the most common:
- Muscle sprains, strains, and tears
- Bone fractures
- Cuts, lacerations, and punctures
- Repetitive strain or stress (RSIs), such as carpal tunnel, tendonitis, and back pain
- Slips, trips, and falls
Other covered injuries may include burns and scalds, transportation accidents, exposure to harmful substances, and psychological injuries caused by workplace stress, trauma, or harassment.
In addition, there are common “fatal” incidents such as:
- Electrocution
- Getting crushed while stuck between objects
- Being struck by an object or piece of equipment
- Falling
Workers’ compensation does not cover some injuries and circumstances. For example, if an employee who is intoxicated or under the influence of substances causes an accident, if an employee engages in unlawful activities, or if the employee disregards safety rules or company policy.
Other instances that are not covered include a self-inflicted injury, where one party intentionally inflicts harm upon another, or if an employee is injured while not on company time.
Determining compensation and benefits
Several factors, such as the severity of the injury, healthcare and medical expenses, and lost wages, determine compensation and benefits.
Each of these factors is considered to ensure fair and adequate compensation while also incentivizing employers to maintain a safe work environment.
Extent of the injury
The severity of the job-related injury plays a significant role in determining the amount of compensation issued. More severe injuries, such as permanent disabilities or serious injuries, result in higher compensation to support the injured worker.
Medical expenses
Medical expenses, such as hospital bills, rehabilitation costs, and ongoing treatments, are considered to ensure the injured employee receives the appropriate medical care and support.
Lost wages
Lost wages due to the inability to work during recovery are also considered when calculating benefits. The calculation of lost wages is usually based on a percentage of the employee’s average weekly wage or salary.
Employer responsibilities in workers’ compensation
Employers are responsible for paying workers’ compensation, and there are a few requirements and obligations to follow to remain compliant and maintain a safe working environment.
The following obligations should be front of mind for all employers and business owners paying workers’ compensation coverage.
-
Mandatory coverage is required by state law in most US jurisdictions
-
Establish clear protocols for reporting workplace accidents or injuries, including the process and time requirements
-
Maintain proper records of workplace injuries, ensuring that they are accurate and updated
-
Provide employers with information about their rights to workers’ compensation benefits
-
Maintain a safe and hazard-free working environment, implementing safety protocols and providing appropriate training to minimize risks
-
Establish safety programs and procedures tailored to the specific risks of their industry
-
Cooperate with the insurance company, insurance carrier, and authorities during the claims process and investigations
-
Develop return-to-work programs to facilitate the reintegration of injured employees
Most importantly, employers must comply with all workers’ compensation laws and regulations applicable in their jurisdiction, providing coverage to eligible employees and paying premiums accordingly.
Employee rights in workers’ compensation
When filing a workers’ compensation claim, employees are entitled to several important rights to protect their well-being and financial security.
Firstly, they have the right to access necessary medical treatment and rehabilitation services to recover from work-related injuries or illnesses. Eligible employees also have the right to receive disability benefits, which may include temporary or permanent disability compensation, depending on the severity of their impairment.
Workers’ compensation also grants job protection rights, ensuring employees cannot be terminated or retaliated against solely for filing a claim. In addition, injured workers have the right to file a claim without fear of discrimination or adverse actions from their employer.
These rights empower employees to seek proper care, financial support, and job security when dealing with work-related injuries or illnesses.
Appeals and disputes in workers’ compensation claims
When employees encounter challenges or disagreements during the workers’ compensation claims process, several options are available to address these issues. In the US, this includes:
- Internal appeals process to challenge claim denials, dispute benefit amounts, or seek resolution
- Mediation, which is a voluntary process where an impartial mediator helps facilitate discussions between the employer, the employee, and the insurance provider
- State Workers’ Compensation Board is available in most US jurisdictions, allowing employees to file formal disputes or appeals with their workers’ compensation cases
- Formal hearings through an administrative law judge or hearing office are available if informal methods fail to resolve the dispute
- Legal representation from a workers’ compensation attorney
- Independent Medical Examination (IME) entitles an independent medical examination by a third-party physician
- Review by state agencies is available in some states
Easily manage workers’ compensation with Deel
Deel offers everything you need to streamline global payroll, HR, and compliance for remote teams—including managing workers’ compensation insurance coverage.
Our flexible and scalable solution, and team of legal experts, can ensure you remain compliant with your workers’ compensation program and other payroll responsibilities. Learn more by booking 30 minutes with an expert for a product demo and Q&A session.
