“Why do I need Workers’ Compensation Insurance?”
It’s a question you’ve probably asked before, especially if you’re getting ready to start a new business or bringing on new hires. And it’s a fair question. The average IT business is a pretty safe place to work, after all.
However, consider these very good reasons IT employers may require Workers’ Comp:
- Serious, expensive work injuries can and do occur in the office.
- As the employer, you're legally responsible for your employees' work injuries.
- Workers’ Compensation Insurance can help cover these work injury expenses.
- State laws require employers to have this coverage – and enforce penalties and criminal charges for noncompliance.
Over the next few weeks, we’ll explore how Workers’ Comp affects tech businesses, how common injuries happen, how to prevent work injuries, and what your Workers’ Comp responsibilities are when your business hires new employees or brings on independent consultants.
For now, let’s dive into Workers’ Compensation by reviewing what it is and how it works.
What Is Workers’ Compensation Insurance?
In the simplest terms, when your employee becomes sick or injured on the job, Workers’ Compensation Insurance can pay for their medical expenses and lost wages.
For example, while your employee carries a monitor to his new desk, he slips on a loose piece of carpet and falls. He breaks his arm in the process and has to go to the hospital. Your small business’s Workers’ Compensation policy can typically cover his hospital bills.
While most states allow employers to purchase private Worker’s Comp polices from various insurance carriers, a few states offer state-run programs, of which are mandatory for employers.
Whether it’s a private policy or a state program, though, Workers’ Compensation Insurance is designed to help pay for an injured employee’s…
- Medical bills.
- Ongoing care, including rehabilitation.
- Partial lost wages.
- Funeral expenses and death benefits (if the worker is killed on the job).
Why Do Most States Require Employers to Have Workers’ Compensation?
If your tech business has employees, chances are your state requires you to have Workers’ Compensation coverage.
In the early 20th century, nearly every state adopted its own law requiring employers to carry this policy so injured employees could collect benefits easier. The federal government doesn’t have much say in this area – it only governs Workers’ Comp for its own employees, railroad workers, and longshoremen.
Because of this, the laws tend to vary from state to state and industry to industry. Some businesses are required to have Workers’ Compensation Insurance if they only have one employee. Some aren’t required to carry the coverage until they hire three or four.
The most important thing you can do is understand your state's Workers' Comp requirements. Find your state under the “Workers’ Comp State Laws” section of our Workers’ Compensation page to be directed to your state's labor department.
What Does Workers’ Comp Insurance Cost?
As you can imagine, the cost of Workers’ Compensation Insurance changes drastically depending on how many employees you have and how likely they are to get hurt. Because tech businesses are in a low-risk industry, employees are relatively cheap to insure with Workers’ Comp.
Though you won’t get an accurate quote until you actually apply for a policy, you can see some sample quotes for Workers’ Comp:
- Single IT contractor / web designer: From $640 to $1,100 in annual premiums.
- Small IT company (0 - 2 staff , 0 - 5 programmers): Around $2,400 in annual premiums.
- Large IT company (6 - 10 staff, 10 - 50 tech employees): Around $11,000 in annual premiums.
Other factors that can affect your premium are your payroll and claims history. If your employees are paid a lot, they stand to lose more in missed wages and your premium will increase accordingly. If you have a comparatively unsafe office and lots of workplace accidents, your premium may be higher because your workers are more likely to be injured in the future.
In the coming days, we’ll go over how to keep your office safe and other ways to manage your Workers’ Comp costs, so be sure to check back. In the meantime, take a look at “4 Tips to Lower Your Tech Firms’ Workers’ Compensation Insurance Costs.”