Why You Should Discuss Workers’ Compensation With Clients

All employers must provide a reasonably safe workplace for their employees. However, millions of American workers are injured on the job each year, and the cost of workplace injuries can be significant.

In 2021, businesses paid $60 billion in response to workers’ compensation claims, and in 2022, more than two million workers missed at least one day of work due to workplace injuries.

The prevalence of on-the-job injuries is why most states require businesses with employees to have workers’ compensation insurance. Each state differs in terms of the employee count that triggers requirements. Some even impose hefty fines if an employer fails to maintain the required intentional coverage.

Because there can be a lot to keep track of, and some businesses may not even be aware they’re required to provide this coverage, it can be an opportunity for your accounting practice to enter into the equation.

Over 80% of small businesses consider their accountants trusted advisors, looking to them for consultation beyond the bookkeeping basics. Helping your clients understand the ins and outs of coverage can keep them compliant and may even drum up more billable hours for your firm.

Why discuss workers’ compensation insurance with your SMB clients?

Workers’ compensation insurance is a legal requirement in nearly all 50 states (with Texas and South Dakota being the exception). That said, even if it wasn’t a requirement, it still makes sense for every business to carry an adequate policy.

Having the proper coverage offers a few essential benefits that protect a company from costly issues, and provide peace of mind for employers and employees.

How workers’ compensation insurance helps businesses

• Avoiding potential penalties and fines: States have particular laws regarding workers’ compensation, and fines vary depending on where a business is located. Almost all states levy fees or penalties for employers who ignore mandates (or don’t have enough insurance coverage). These can range from $100 to $10,000. In some cases, flouting the rules can even result in prison time.

• Limiting a business’s exposure to liability: Even if an employer has insurance, the policy might not cover the full extent of damages caused by injury or illness. For example, workers’ compensation insurance doesn’t protect a business from lawsuits brought by an employee harmed on the job. Holding the recommended amount of coverage may limit legal liability by covering the costs of medical bills or lost wages that workers might seek to recover through legal action.

• Peace of mind for productivity: Many companies consider their employees to be among their most valuable assets. Knowing that they are protected should an on-the-job incident keep them off their feet for a while can be reassuring to workers. Employees can feel confident about their employer’s commitment to their well-being, as well as their families.

Now that we have a better idea of how a policy can help your practice’s clients, let’s find out more about what this coverage can do.

What does workers’ comp insurance cover?

Workers’ compensation covers injuries or occupational illnesses arising out of employment (sometimes called AOE) or harm sustained during the course of employment (known as COE).

In some lines of work, such as construction, injuries caused by onsite accidents are common. Other times, the nature of the work might lead to a chronic overuse injury, like degenerative knee or back pain caused by repetitive tasks or prolonged standing. Sometimes, individuals may also experience an illness or disease they can prove was caused by their job.

Insurance pays for the damages that relate to the injury or illness. These may include:

• Job retraining and educational benefits
• Permanent partial or total disability
• Lost wages or other compensation
• Survivor death benefit
• Cost of rehabilitation
• Funeral expenses
• Long-term care
• Medical bills

In some states, the law doesn’t require that employers obtain coverage for certain types of workers. Every state has its own legal requirements, so it’s crucial that employers stay up to date on their state regulations.

You can check out basic state requirements here. It’s always a good idea to encourage your clients to review their state government’s resources as well.

Why should accounting firms become familiar with workers’ compensation?

Clients may not have worker’s compensation or may need guidance on how to implement it

Almost 50% of small businesses who participated in an OnPay survey shared that they were going without a policy. This could be because they don’t understand the risks of not having one or are unaware of the requirements.

In addition, rules coverage can be a little tricky. Employers must obtain coverage through state-owned programs in some states, such as North Dakota, Ohio, Washington, and Wyoming.  

Clients may have worker’s compensation but could save money and resources

At the beginning of each year, traditional policies usually require employers to make an upfront, lump-sum deposit, which can be a big hit to the cash flow of a small business.

Your clients may also be unaware of options like pay-as-you-go workers' compensation (PYG). With PYG, premiums are calculated based on actual wage data from each pay period to avoid overpaying premiums and leaving fewer reserves for business operations. In most cases, an upfront deposit is not required. If your firm works with businesses with cash flow concerns, they'll likely appreciate you bringing this to their attention.

Open the door to more services

Over a quarter of accountants surveyed by OnPay shared that assisting with benefits administration is at the top of the list of additional services they want to offer. Guiding clients on workers’ compensation rules can be the starting point for managing other benefits, such as 401(k), commuter benefits, and popular perks such as health coverage.

How do I find the best coverage for my clients?

Small business payroll companies work with insurance carriers and can help you determine what type of workers’ compensation your clients need to be protected from liability and in compliance with state law.

Most can help you with research and comparing rates. Look for solutions from the companies you already partner with and be sure that your coverage works for your client’s specific line of business.

Talking about coverage can be a win-win for your practice’s growth and client relationships

Discussing workers' compensation insurance can benefit your clients, their employees, and your firm's future. On one hand, the businesses you’re working with may not be up-to-speed on their state’s rules, need guidance, and are willing to put hours toward a consulting fee.

For accounting practices seeking ways to nurture existing relationships and create opportunities to offer more services, discussing this topic is an effective way to show clients that you’re thinking about the long-term health of their business. This also puts you in a position to offer more services to grow your firm in the future.

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