Though mandatory, workers’ compensation coverage offers key advantages for employers. When workplace accidents occur, it helps limit liability, fulfill legal duties, improve employee relations, cover legal costs, and manage claims. While paying benefits is expensive, workers’ comp protects companies from massive lawsuits. There are good reasons for businesses to value this system. This article explores the top 5 benefits of workers’ compensation for employers seeking to protect their organizations and employees.
Fulfills Legal Obligation
Private employers are legally required to have workers’ compensation insurance or otherwise ensure their ability to pay benefits. This requirement exists in all 50 states. According to the U.S. Bureau of Labor Statistics, private industry employers reported 2.8 million nonfatal workplace injuries and illnesses in 2022, up 7.5 percent from 2021. With growing numbers of workers getting hurt on the job, businesses must fulfill their legal obligation to provide coverage. Carrying workers’ compensation allows employers to comply with the law and avoid penalties.
Limits Liability
Workers’ compensation is an injured employee’s exclusive remedy against the employer for job-related injuries and illnesses. This means employees cannot sue the employer in court for damages like pain and suffering. Workers’ compensation limits employers’ financial exposure. While benefits must be paid according to law, there are caps on the amounts payable for disability, medical treatment, and death benefits. According to recent reports, total employer costs for workers’ compensation in 2019 were $100.2 billion. So, while substantial, the workers’ compensation system reduces liability compared to tort litigation.
Improves Employee Relations
Providing workers’ compensation shows employees that their well-being is valued. It demonstrates a commitment to protecting them in the event of workplace injuries or illnesses. Workers’ compensation income and medical benefits support workers and their families during difficult times. This boosts morale, loyalty, and goodwill. It can also help with recruiting and retention. According to the Bureau of Labor Statistics, 33.0 percent of workers were exposed to the outdoors as a regular part of their job in 2023, facing risks like heat illness and lightning strikes. Offering workers’ compensation for those who face occupational hazards is smart employee relations.
Covers Legal Fees
Workers’ compensation insurance includes coverage for legal defense costs. When an employee files a claim, the insurer assigns defense counsel to represent the employer. Attorneys’ fees to defend against disputed or questionable claims are covered. This avoids potentially high legal expenses for employers. Handling disputes is part of the service covered by workers’ compensation insurance.
Provides Claims Management
Workers’ compensation insurance carriers employ adjusters experienced in handling claims. The insurer takes responsibility for investigating claims, determining compensability, calculating benefits, and making payments. This administrative burden is removed from employers. The insurer’s oversight helps control claim costs and identifies potential fraud. Delegating claims management to the workers’ compensation insurer is more efficient for businesses.
Without workers’ compensation, businesses may face huge lawsuits for employee injuries. For example, an ironworker suffered catastrophic injuries when a car hit his motorcycle while he was en route to a job site. The accident caused irreparable damage to his brain and spine, requiring lifetime medical care. He was able to hire a workers compensation attorney who helped him receive a settlement of $13.2 million.
So, while workers’ compensation benefits are costly, they prevent even larger legal judgments against businesses. Providing coverage protects employers from individual employee lawsuits that could be financially devastating. The workers’ comp system benefits both injured workers and the companies that employ them.
