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Why Employers Should Consider Workers Compensation

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Employers want to ensure that they are doing right things to protect themselves from liability, but because Texas is one of the few states where Workers Compensation is elective, it’s often overlooked. is crucial to the survival of many businesses, but it is often overlooked because it is elective in the state of Texas.

The fact is, Workers Compensation can be crucial to the survival of many businesses, and there are many ways to control costs. Recently, there has also been a useful add-on called EPL insurance (EPLI) that provides additional protection in the case of an employee-initiated lawsuit.

Here’s a straight-forward assessment on what you need to know about Workers Compensation so you can make an informed decision about the applications in your company:

The Least You Need to Know. Workers compensation is a program that businesses offer as a standard, statutory benefit to employees who are injured while working or experience job-related illnesses in the workplace. A typical Workers Compensation program will cover medical expenses such as surgery, hospital stays, rehab or prescriptions while ensuring that the employee continues to receive a paycheck during the recovery period. This compensation makes it unnecessary for the employee to sue the business for the event that led to these expenses.

Why You Need It. While the state of Texas doesn’t require all businesses to offer Workers Compensation to their employees, not doing so may put your company at considerable risk. You can imagine what would happen to the fortunes of even the richest company if enough of its workers got sick or hurt on the job and decided to sue for lost wages and medical expenses. For smaller companies, the potential financial burden only becomes greater with each individual case. Worse, if you have no Workers Compensation program in place when your employee sues for compensation, you’ll automatically waive your common-law defenses in the case. On the positive side, Workers Compensation makes your company more attractive to top-drawer prospective employees.

What You Get. A Workers Compensation policy is a pure form of risk transfer – the financial liability of work related injuries and sicknesses, for both medical and income benefits, are now contractually covered by the policy. Additionally, due to the ‘exclusive remedy’ nature of Workers Compensation policies, the companies exposure to lawsuits and legal fees are significantly reduced unless the harm to the employee resulted from the employer’s intentional act or gross negligence. In addition to the benefits to the company, the employees also benefit by being covered for work related risks.

A recent example demonstrates the risks associated with work related injuries. A furniture store had an employee fall off of a step ladder and incurred minor injuries. The total expense of legal defense and award paid to the employee was $35,500. Following settlement of the case, the company purchased Workers Compensation coverage for annual premium of $6,000. Not only was the law suit disruptive to day to day business, but the cost/award hurt cash flow and was more than 5 times the cost of insurance.

For most companies with gray and white collar employee populations, the cost of WC is minimal, particularly in comparison with the risk. Please take a moment to assess your risk, and we are pleased to be able to recommend David Miller, VP, Small Business Insurance @ Eckert Insurance to assist with risk evaluation and customized proposals. David can be reached at dmiller@eckertgroup.com or (512)472-6969.

Stay tuned for a discussion of the financial side of Workers Comp.

dan hettrichDan Hettrich is the director of sales at Acadia HR located in Austin, Texas. He can be reached at dan@acadiahr.com or 512-745-2985.

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Written by Dan Hettrich

March 18, 2011 at 1:58 pm

Posted in Uncategorized

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