Workers’ compensation is a system that provides financial and medical benefits to employees who are injured or become ill because of their job.
1. What It Covers
Workers’ compensation pays for medical expenses, lost wages, and rehabilitation costs when an employee is injured or becomes ill due to their job.
2. Employee Injury Protection (No-Fault System)
Workers’ comp is generally no‑fault, meaning employees receive benefits regardless of who caused the injury, as long as it happened in the course of employment.
3. Employer Liability Protection
In exchange for providing workers’ comp benefits, employers are usually protected from employee lawsuits related to workplace injuries (with limited exceptions).
4. State Requirements and Coverage Rules
Most states require businesses with employees to carry workers’ comp. Requirements vary by state and are based on factors like:
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Number of employees
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Industry risk level
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Payroll size
5. Premiums Are Based on Risk and Payroll
The cost of workers’ comp is calculated using:
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Total payroll
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Job classifications (risk level of work)
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Claims history
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Safety practices