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What is Workers’ Compensation?

Key Takeaways

1. Workers’ compensation is a type of insurance that offers wage replacement and medical benefits to workers who become injured in the course of work or who acquire an occupational disease.

2. The US Department of Labour suggests that private employees are still making worker’s compensation claims at a rate of 2.7 cases per 100 full-time workers.

3. The most common types of workplace injury are slips, trips and falls, manual work accidents, burns, car crashes, repetitive strain injuries and recently occupational disease arising from respiratory illness in the nursing sector.

4. Workers’ compensation insurance exists in various forms throughout the world, including the UK and Australia.

Workers’ compensation insurance offers wage protection and medical benefits to employees who suffer a workplace injury or occupational disease. (It should not be confused with unemployment insurance aimed at those who involuntarily lose their job).

Even though the US workplace is a far safer place than it used to be, the situation cannot be taken for granted as the latest data from the US Department of Labour suggests that private employees are still making worker’s compensation claims at a rate of 2.7 cases per 100 full-time workers [1].

Also, total reported occupational illnesses nearly quadrupled over 2020, (driven by the nursing profession’s frontline role in the pandemic) and may peak again during the winter months so workers’ comp deserves to be a front of mind issue.

A related concept is disability insurance, which provides partial or full income replacement to those suffering a disability, whether it arose from the workplace or elsewhere. 

What is workers’ compensation?

Here is a more detailed look at workers’ compensation, or workers’ comp insurance, as it is referred to also.

Federal workers’ compensation

In the US, federal workers’ compensation payments are delivered through the Office of Worker’s Compensation Program (OWCP), of the US Department of Labor. If a federal worker (or dependent), is injured at work or begins to suffer with an occupational disease they can receive compensatory payments through 4 main disability programs.

  • Federal Employees’ Compensation Program
  • Longshore and Harbor Workers’ Compensation Program
  • Federal Black Lung Program
  • Energy Employees Occupational Illness Compensation Program

There are three main types of compensatory benefits a federal worker can receive, and these are: wage replacement benefits, medical treatment, and vocational rehabilitation.

Non-government civilian worker

Non-governmental civilian workers cannot claim through the federal OWCP and must file for state workers’ compensation benefit via the employer [2]. Like the OWCP, state workers’ comp insurance provides financial support for employees to help with medical costs, surgeries and treatment, partial and total disability benefits, specific loss benefits and death benefits. The nature of these benefits is determined by the specific state Workers’ Compensation Act[3].

One key difference between federal and state worker’s compensation is sovereign immunity in that federal workers cannot generally sue the federal government for any on-the-job injury even if the government is quite obviously at fault, except under specific circumstances [4].

Worker’s compensation insurance exists in various forms throughout the world, such as Australia and the UK, for example.

Australia

Unlike the US, in Australia, workers’ compensation insurance administration is completely decentralized to individual Australian states and territories and is governed by regional statutes.

Just like the US however, Australian workers compensation insurance provides financial payment to employees should they become injured at work or sick due to work. Employees receive wages while they are unfit for work as well reimbursement for medical expenses and rehabilitation costs [5].

UK

In the UK, workers’ compensation insurance is referred to as Employer’s Liability Insurance (EL) and all employers are required by law to obtain this insurance to cover work related illness and injury. The policy must offer at least £5 million cover and must be administered by an authorized employer. Employers can be fined up to £2,500 for every day they do not hold proper insurance. Employers also need to display their EL certificate in the workplace and can be fined £1,000 for not doing so.

How can a global PEO help with workers’ compensation?

Expanding nationwide or overseas is an exciting challenge, but it will most likely represent a significant stretch assignment for the organization. New technologies, new business cultures, and new legislation must be mastered to secure a swift, decisive, and sustainable entry into any international market.

Launchpad into new markets

Global PEOs are experienced in helping growing organizations expand internationally and most likely will already have invaluable experience and contacts within your intended geographical area of expansion. This means a global PEO can act as a launch pad for your expansion into a new country or market.

By taking on the administrative work relating to employing staff overseas, Global PEOS can quickly overcome any regulatory barriers, (such as establishing the mandatory employee insurances), that would normally slow down the international employment process.

Global PEOs partner with your organization, (and HR teams), and can use their unique local expertise and network to rapidly set up for you the local employment infrastructure which you need to engage staff. Payroll processing, hiring, employment contracts, benefit, and tax administration and, workers’ comp on can all be managed by the PEO on your behalf.

International workers’ compensation

Workers’ compensation is crucial during international expansion as due to the operation of your business in unfamiliar territory occupational risk factors may be higher than usual. It’s crucial that your leaders and workers feel protected should an injury occur. As with many benefits, Workers’ compensation implementation is both complex and varies dramatically by country and can vary according to the type of overseas employee you are hiring, e.g whether they are.

  • US expats – legal residents of the US hired to work outside of the states
  • Foreign nationals working for you overseas but outside of their own country
  • Local nationals working for you overseas in their home country.

Horizons manages workers’ compensation contributions and international payroll

If you need help with the implementation of your international hiring plan, then please get in touch with us at Horizons as we can support businesses internationally by administering payroll and worker’s compensation internationally.

Frequently Asked Questions (FAQ)

 A workplace injury or illness is a malady that was caused, contributed, or significantly aggravated by activities that take place while at work.  [6]The most common types of workplace injury are slips, trips and falls, manual work accidents, burns, car crashes, repetitive strain injuries and recently occupational disease arising from respiratory illness in the nursing sector[7].

Workers’ compensation insurance at its core offers wage replacement to workers who become injured in the course of work or who acquire an occupational disease. Additional wrap around components of this insurance include help with medical costs, surgeries, and treatment and in some circumstances include partial and total disability benefits, specific loss benefits and death benefits.

It is a crucial benefit as employees who suffer injury during work would otherwise have no way to support themselves, their family, and their own rehabilitation. The workplace still reports a worker injury rate of 2.7 per 100 workers every year with a quadrupling of occupational disease claims in recent times, underlining the importance of worker’s compensation.

References

[1] https://www.bls.gov/news.release/pdf/osh.pdf

[2] https://www.paworkinjury.com/blog/2016/02/federal-and-state-workers-compensation-distinctly-different/

[3] https://www.dli.pa.gov/Individuals/Workers-Compensation/publications/Pages/WC%20Act/WC-Act-Landing-Page.aspx

[4] https://www.emdlaw.com/news/federal-versus-state-workers-compensation/

[5] https://www.fairwork.gov.au/employment-conditions/workers-compensation

[6] https://www.injurylawyers4u.co.uk/2012/news/revealed-the-5-most-common-accidents-in-the-workplace/

[7] https://www.bls.gov/news.release/pdf/osh.pdf

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