Your Guide to Workers’ Compensation Coverage through a PEO

Your business is likely required to obtain workers’ compensation insurance as soon as you hire one or more employees. With it, you’ll comply with legal requirements and gain access to the financial peace of mind that insurance offers.

However, the process of shopping for and obtaining coverage takes time that busy small business (SMB) owners may not have available.

Let’s explore what coverage you’re required to obtain, what workers’ compensation really does, and how a PEO can streamline your professional services, including workers’ compensation.

The Basics of Workers’ Compensation Coverage

Workers’ compensation is a form of insurance that provides financial and medical benefits to employees who suffer job-related injuries or illnesses.

What Workers’ Compensation Covers

In general, the key requirement of workers’ compensation coverage is that the injury or illness is work-related. If a covered event occurs, depending on state law, compensation often covers:

• Medical Benefits: Including medical provider visits, medication, and any other necessary treatments.

• Disability Benefits: Based on whether the disability is total or partial, and temporary or permanent. The combination of these factors determines what benefits the employee is entitled to.

• Rehabilitation Benefits: Includes physical rehabilitation as well as vocational rehab.

• Death Benefits: In the worst-case scenario, workers’ compensation can benefit a worker’s dependents, such as a spouse or children.

Workers’ Compensation is a No-Fault System

One of the defining features of workers' compensation is that it works on a no-fault basis.

This means employees are generally eligible for benefits regardless of who was at fault for the injury. This benefits all parties involved, as it saves the time and effort necessary to determine fault. The main trade-off is that employees generally cannot sue their employers for covered injuries or illnesses.

Workers’ Compensation Coverage is Generally Required for SMBs

Most states require workers’ compensation coverage when a company has at least one employee, with Texas being the only state where it is not required.

Idaho, for example, requires workers’ compensation as soon as there are one or more employees within an organization. This is true whether the employees are full-time, part-time, seasonal, or occasional.

Sticking with the Idaho example, a few exceptions to the rule above include:

• Household domestic workers
• Sole proprietors
• Family members working from a sole proprietor’s home
• Agricultural spraying and dusting pilots
• Casual employment

Navigating workers' compensation requirements can be challenging so SMB owners are advised to invest time in thorough research or consider partnering with a PEO to help with the process.

The Risks of Not Procuring Workers’ Compensation Coverage

Since most states require workers’ compensation coverage, forgoing it entirely can carry significant legal and compliance risks, as well as financial risks associated with medical fees and lost wages caused by employee injuries.

• Legal Penalties: SMBs who operate without required coverage open themselves up to fines, civil penalties, and even criminal charges.

• Liability for Medical Costs & Lost Wages: The average cost of work-related accidents is around $41,000. SMBs with no coverage can be liable for all of this and more.

• Legal Risk: In addition to serious penalties and fines, a lack of workers’ compensation coverage opens up SMBs to personal injury lawsuits from employees that otherwise in most instances would be barred under the exclusive remedy doctrine – a provision that protects employers from being sued by injured employees receiving workers’ comp benefits.

Even if you aren’t technically required to obtain workers’ compensation coverage, not having it means potential legal battles and business-interrupting challenges if an employee ever gets injured or sick on the job.

Solid Workers’ Compensation Coverage Will Prevent Headaches Down the Line

Though the risks of not having workers’ compensation are clear, there are also clear benefits to obtaining quality coverage early in your business journey.

Here are 3 key advantages:

• Financial Protection: SMB owners with workers’ compensation coverage are protected against costs associated with legal penalties, fines, medical expenses, rehabilitation, and lost wages.

• Liability Shield: By accepting workers’ compensation coverage, employees are generally not allowed to sue their employer for covered injuries or illnesses, providing additional protection for SMB owners against costly lawsuits.

• Peace of Mind: Knowing that the business and its employees are protected against medical costs and lost wages in case of a workplace accident provides peace of mind to the business owner, allowing them to focus on more important daily business operations.

How PEOs Make the Process of Obtaining Workers’ Compensation Coverage Easy

SMB owners have a choice to make; spend time pricing options and ensuring their company obtains the right coverage, or save time by partnering with a PEO who can provide the necessary coverage for their business.

Professional Employer Organizations (PEOs) like BBSI can simplify the process of acquiring workers’ compensation through internal underwriting processes. Internal underwriting allows BBSI to expedite the acquisition of workers' compensation coverage for businesses and their employees.

Leaving coverage acquisition to a PEO allows business owners to focus on core operations and strategic aspects of their company, knowing they are properly covered through their PEO partnership.

How PEOs Can Offer Workers’ Compensation Coverage with Lower Rates

PEOs like BBSI provide comprehensive workers’ compensation programs that are designed to provide required coverage with flexible pricing, predictable premiums, and efficient administration. They do this by:

• Prioritizing Availability: The right PEO should offer coverage with streamlined claims handling processes and 24/7 hotlines so employees have reliable support in case of workplace injuries.

• Proactive Risk Management: PEOs like BBSI often offer gap analyses to identify workplace risks. The result of the analysis allows for the development of safety programs and cultural improvement plans that support a reduction in claim frequency, ultimately reducing premium costs.

BBSI Provides Solutions for Your Workers’ Compensation Coverage Needs

Workers’ compensation coverage is a legal requirement in almost every state in the union. Even in rare instances where coverage is not required, choosing to forgo workers’ compensation is a high-risk strategy with few upsides.

However, knowing this doesn’t make the process of shopping for and choosing workers’ compensation coverage any easier. For SMB owners who also have to worry about HR, payroll, and managing talent, a PEO like BBSI can be a lifesaver.

BBSI specializes in unique, tailored solutions to our clients’ professional service needs, including workers' compensation.

If you need help finding a workers’ compensation plan that includes:

• Financial Flexibility,
• Proactive Risk Management,
• & Safety Culture Development,