For business owners, the topic of workers’ compensation may seem a daunting and tedious subject. However, a few questions can help us quickly demystify the topic: what is workers’ compensation insurance, who needs to have it, what is covered, and how do you get coverage?
What is workers’ compensation insurance?
Workers’ compensation is an insurance system designed to protect both you and your employees in case of a workplace injury or illness. Workers’ compensation policies in Utah are referred to as no-fault policies; neither your business nor the injured or ill employee may be held liable in court for legal judgements (this is referred to as exclusion remedy protection). Workers’ compensation also helps expedite the employee’s medical care and rehabilitation, making it easier and safer for them to quickly return to work.
Workers’ compensation requirements in Utah
In Utah, most business owners must purchase workers’ compensation insurance to be compliant with Utah Code 34A-2-201. There are a few exceptions to this requirement, such as businesses that do not have employees:
- Sole proprietorships
- Limited liability companies (with only the owners as employees)
Some professions are exempt from workers’ compensation requirements, such as some agricultural workers. Before you purchase insurance, review the waiver requirements at the website for the Utah Labor Commission.
Utah law requires employers to provide workers’ compensation coverage and prohibits the cost from being passed on to employees.
The price of failing to obtain coverage
The state of Utah regularly reviews companies’ workers’ compensation policies to make sure they are current. If you fail to purchase or renew your coverage, the state may revoke your business's exclusion remedy protection, meaning that an injured employee may seek damages from your company. Without exclusion remedy protection, your business could easily become burdened with an expensive and lengthy court case. Those fees are in addition to the minimum $1,000 fine that the state of Utah will levy on your business. Workers’ compensation is a mutually beneficial safety net for you, your business, and your employees.
Pricing workers’ compensation insurance
There are several things that might impact the cost of your workers’ compensation coverage.
Utah requires insurers to use a standard set of classification codes for different occupations when determining the likelihood of injury or illness for a profession. That risk value and the employee’s yearly payroll amount is then used to calculate the base cost of the premium.
Let’s look at an example. A construction worker in Provo, Utah has a job that is potentially quite hazardous. Let’s assume that risk multiplier for this occupation is 7.54% (compared to a hypothetical risk multiplier of 3.25% for a food service job). We then take that base rate and multiply it by the yearly payroll for that employee, divided by 100.
BASE RATE % x (PAYROLL/100)
In this example, if the construction worker makes $80,000 a year, the calculation becomes:
7.54 x (80,000/100)
Which equates to a yearly premium of $6,032 for the employee. (Note that these values are examples only and that you must contact an insurer for accurate calculations for your business.)
Insurers may also apply modifiers to either raise or lower your base premium by reviewing the number of previous claims you have filed, the rate of accidents on the job, and the presence of safety programs.
If you prevent accidents at your workplace, you will reduce your insurance premiums. The Utah Labor Commission recommends that every company establish a safety training program for its employees. To get started, call (800)-530-5090 to schedule a free consultation appointment with the Utah Safety and Health Consultation Program.
Number of accidents and claims
As with auto insurance, the number of claims you have submitted directly impacts the price of your insurance premium. Expensive claims can also impact your premiums. The Utah Labor Commission recommends that employers work closely with an injured employee to ensure that they’re getting proper care. In addition, helping the employee return to work on light duty tasks can also reduce your premiums while also helping you retain a valuable employee.
“Research indicates that employers who routinely do only one thing—call injured employee right away and ask, ‘How are you doing? Hope you get back soon’ —reduces disability claims by 21 percent.
Purchasing workers’ compensation insurance in Utah
Workers’ compensation: a necessary protection
Workers’ compensation insurance helps protect both you and your employees from unforeseen, unfortunate workplace-based injuries and illnesses. While no one wants to assume that the worst will happen, we have to be prepared in case it does. By purchasing a reliable workers’ compensation policy, you will be compliant with Utah’s business regulations and also be providing both you and your employees peace of mind.
Workers’ compensation employee’s guide:
Workers’ compensation employer’s guide:
Quick Reference to Workers’ Compensation Benefits, Effective July 1, 2017 (Applies to the 2018 fiscal year)
Workers’ Compensation Act (Utah)