Workers’ compensation insurance is crucial no matter the size of your company. In most states, it’s legally required as soon as you hire your first employee. Not only does it help protect your employees in the event of an accident at work, but it also helps protect you and your company financially. Without workers’ comp coverage, you could be expected to pay out of pocket for expenses like medical bills, rehabilitation costs, or lost wages.
Traditional workers’ compensation can make sense for larger corporations, but small businesses may experience a huge financial impacts. Let’s look at the financial impact of workers’ comp on small businesses as well as cost-management strategies that can be put in place to manage financial risks.
Analyzing the Financial Impact of Workers’ Comp
As essential as workers’ compensation is for companies of all sizes, it’s important to look at the financial impact it can have on small businesses.
Workers’ comp often requires large lump sums up front to cover the premium cost for all employees. This may work for large companies that have the capital to cover those costs. Small businesses, however, may not have the funds to pay large amounts upfront.
Small businesses may also hire primarily independent contractors, seasonal workers, or part-time employees—which likely means you would be paying for more coverage than needed with traditional workers’ compensation.
Additionally, small businesses may not have the manpower to handle workers’ comp claims or hire a temporary employee to take over while someone is recovering. Without an HR department, other members of the team would likely have to step in to help. This would mean their own projects being put on pause, or paying overtime for them to get all of their work done.
Cost-Management Strategies for Small Businesses
1. Implement a safety training program
Risk management is crucial for helping keep workers’ compensation costs down as well as helping you maintain a safe work environment for your employees. Start by implementing a solid safety training program for both new hires and your existing employees. Offering these training sessions within the onboarding process is a great way to encourage safety right away and get new employees up to speed with company culture.
2. Stay on top of workers’ comp claim filing
Delays in workers’ compensation claim filing can be costly. When an employee is injured at work, it’s important to stay on top of the process so that they immediately receive the medical care and support they need. What begins as a minor injury could end up escalating without proper care right away—which can be detrimental both to your business and to your employee.
3. Consider pay-as-you-go options with a PEO
Professional employer organizations (PEOs) offer pay-as-you-go workers’ compensation options that can be incredibly helpful for small businesses. If your employees work on a project-by-project basis, are seasonal workers, or even part-time employees, you could benefit from working with a PEO. Pay-as-you-go workers’ comp allows you to pay only for what you need, when you need it. This means you won’t be required to pay large lump sums upfront—you’ll simply pay as you go.
Additionally, because PEOs work with so many businesses, by pooling all of their clients in together they’re often able to negotiate more affordable rates for great coverage.
Managing Financial Risks with Workers’ Comp
The financial risks that come with workers’ compensation can seem overwhelming for small businesses. Implementing safety training programs, staying on top of claim filing, and considering pay-as-you-go options are great ideas to help manage those risks.
Working with a PEO can be incredibly beneficial for streamlining the process. Not only do PEOs offer pay-as-you-go workers’ comp options at more affordable rates than what you would see with traditional insurance, but they can also help your business implement employee training programs that help build the foundation for a safe work environment. In addition, PEOs handle the filing process, so you won’t have to worry about staying on top of potential workers’ comp claims.
If you’re ready to alleviate some of the burden and effectively manage workers’ compensation costs for your small business, reach out to the experienced team at OCMI workers’ comp today!
