Workers' Compensation 101

One way Paychex Insurance Agency helps bring clarity to business insurance is through our Insurance 101 topics — providing business owners with quick information in plain language.

If you still have questions after reading our Insurance 101 topics, please call a licensed Paychex Insurance Agency Representative at 877-393-8868. We'll be glad to help you answer them.

What is workers' compensation insurance?

Workers' compensation insurance protects employers from being sued by their employees over workplace illness or injuries, unlike disability insurance, which pays benefits to workers who become injured or ill due to non-work related circumstances. Before workers' comp, many employees either couldn't afford to sue their employer, or would become destitute waiting for the case to be tried. So individual states stepped in and created workers' compensation insurance to pay for qualified expenses — avoiding having to determine who was at fault.

What does workers' compensation insurance cover?

Workers' compensation helps employees pay for qualified expenses related to workplace injury or illness, which depending on state laws, may include:

• Medical services
• Rehabilitation services
• Lost income
• Vocational training

Each state determines the amount and duration of workers' compensation benefits and how those benefits are administered.

Is workers' compensation insurance mandatory?

Most employers are now required by state law to carry workers' compensation insurance. To learn more about your state's specific workers' comp requirements, please speak with a licensed Paychex Insurance Agency Representative at 877-393-8868.

Can workers' compensation be purchased as part of a package policy?

While many forms of business insurance may be sold as part of a package, state laws require workers' compensation to be purchased as a separate policy.

As one of the largest providers of workers' compensation insurance for small businesses, Paychex Insurance Agency can provide you with competitive quotes, possibly secure you with discounts when purchased with other types of insurance with the same carrier, and help you manage your plan more efficiently.

What are the difficulties of managing workers' compensation?

Workers' compensation insurance can involve large payments that may cause serious cash flow problems for your business.

That's because payments are based on an estimate of wages paid to employees based on risk (e.g. it's more expensive to cover electricians than to cover desk workers.) Because the premiums are not based on actual wages paid, insurers may require a large upfront payment. And if the estimate is found to be low at the end of the year, you'll have to pay the difference in one lump sum.

How can Paychex Insurance Agency help you manage workers' comp costs?

Our licensed insurance representatives analyze your business needs and present competitive workers' compensation quotes from highly-rated insurance carriers.

We offer Paychex Payroll clients even more to help manage their costs with the Paychex Workers' Compensation Payment Service. It integrates workers' compensation with your payroll process to calculate and collect the premiums owed each pay period — based on actual wages, not estimates.

By determining your true workers' comp costs throughout the year, the payment service can eliminate most upfront premium deposits and year-end audit surprises, ultimately smoothing out your cash flow.

What are your state's workers' compensation regulations?

While most states require workers' compensation insurance, some have their own state plan which discourages competition from private insurers. Several other states require workers' compensation insurance only for employers with more than a certain number of employees.

To learn more about your state's workers' compensation regulations, speak with a licensed Paychex Insurance Agency Representative at 877-393-8868.

What other types of insurance are required by law?

In addition to workers' compensation insurance, U.S. businesses are required to have commercial auto insurance for vehicles registered under the name of the business. Disability insurance is also mandatory in California, Hawaii, New York, New Jersey, Puerto Rico, and Rhode Island.

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