Do Employees Pay for Work Comp?

One of the most common questions that employers and workers ask about workers' comp insurance is:

Do employees have to pay for workers' comp insurance?

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In this brief article, we will answer this question and other related questions to give you a wider understanding of how much workers' comp insurance costs, as well as alternative coverages:

Do employees have to pay for workers' comp insurance?
What types of benefits are awarded to injured employees?
Are there alternatives to workers’ comp insurance?
What happens if an employer doesn’t cover its employees with workers' comp insurance?

Be aware that workers' comp insurance can be complicated and difficult to understand, since everyone’s situation is different and numerous factors can alter the cost of workers’ comp insurance. That’s why consulting an independent insurance agent is a smart decision to supplement what you learn in this article. Independent insurance agents offer expert, unbiased guidance for workers' comp topics such as:

  • Tax liability
  • Insurance alternatives
  • State-specific laws
  • And more

Contact an agent today to gain peace of mind and security for your business. 

Do employees have to pay for workers' comp insurance?

For regular staff and employees, workers' compensation insurance is paid for by an employer as a form of accident insurance to a state fund. It is not a payroll deduction taken out of employees' salaries for this insurance.

Also, those employed by the federal government have workers’ compensation benefits administered by a separate workers' compensation program. Similarly, these employees don’t have to pay for workers’ comp insurance premiums. Employees do not contribute to workers' compensation premiums.

However, some classifications of employees may be required to pay. Independent contractors and subcontractors are responsible for insuring themselves through state-run workers’ comp programs or by self-insuring through private insurers.

What types of benefits are awarded to injured employees?

The following four classifications of workers’ comp benefits maybe offered to injured workers:

Temporary Partial Disability (TPD) Injuries that fall under this category typically reward workers who can maintain some capacity for employment. TPD basically compensates workers for the difference between their previous wages and their current reduced wages.
Temporary Total Disability (TTD) Injuries that are designated as TTD, which prevent workers from performing any work duties, can award up to 2/3 of the worker's income while they recover. However, many states offer benefits up to a certain cap or time. After this period elapses, benefits may end until further medical examinations are performed to determine their current and expected disability status.
Permanent Partial Disability (PPD) For injuries that are serious enough that an injured worker permanently loses the use of their body, they are covered under permanent partial disability, or PPD. This designation is for workers who can only do a limited amount of work after their injury.  Depending on the state where they are employed or reside, the maximum amount that they can expect to receive can vary depending on various factors, such as future employability, available vocational training, and more.
Permanent Total Disability (PTD) If an injury is such that it prevents the worker from working at all in the future, they may be able to get 2/3 of their weekly earnings for the rest of their life. 

State-Specific Benefits

Each state has laws in place that require most employers to pay into a workers' compensation insurance system, providing benefits to injured employees who make eligible claims for workers’ compensation benefits. 

In general, most injured employees can receive the following kinds of benefits via a workers’ compensation claim in most states:

  • Weekly compensation
  • Payment of medical bills
  • Permanent impairment benefits
  • Vocational rehabilitation and training
  • Death benefits

It’s important to note that payment for pain and suffering, as well as negligence claims, are not included in workers' compensation settlements.

While workers' compensation is required for all employers, the level and type of coverage is different for each state. States differ in: 

  • Types of covered employees
  • Types of injuries covered 
  • Acceptable forms of proof of injury/illness
  • Excluded injuries
  • Statutes of limitation regarding the time an employee can file a claim
  • Employer defenses against claims

To find out what benefits your state provides under workers' comp insurance and if you have a valid claim, contact an independent insurance agent.

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Are there alternatives to workers’ comp insurance?

There are a number of alternatives to workers’ comp insurance, depending on the nature of an individual’s work, how they’re classified by the state in which they work, and other laws. Independent contractors are responsible for their own insurance, so they can get private disability insurance that covers their occupation. 

States like Texas don’t require participation in workers’ compensation programs per se, but strongly recommend other forms of similar insurance in accordance with state minimums, such as self-insuring through private insurers or through third-party services. To be sure of your compliance as an employer, consult your state’s workers’ compensation board for more information. 

What happens if an employer doesn’t cover its employees with workers' comp insurance?

Workers’ compensation insurance is offered by employers through state-run programs to protect injured employees, as well as to protect businesses from significant lawsuits that can result from workplace activities. Employers that don’t adequately cover their qualified employees are susceptible to lawsuits by employees. 

However, there are some circumstances in which an employee can still sue an employer for an on-the-job injury or illness, including whether damages were on the part of the employer and/or if the injury was outside the scope of the worker's job assignment. 

Furthermore, each state besides Texas imposes mandatory guidelines for workers’ compensation insurance for qualified employees. Failure to follow these guidelines can result in significant fines and possible criminal charges. Colorado charges non-compliant employers fines totaling $250 per day for a first violation, and $500 per day for subsequent violations. Workers’ comp fraud can also result in significant fines and charges, with employers that misclassify employees or underreport the number of eligible employees receiving stiff penalties. 

To determine if your business is in compliance with workers’ comp guidelines in your state, or if an employer provides adequate coverage, contact an independent insurance agent today. 

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