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Workers' Compensation
A government mandated program that pays benefits to workers who become injured or ill on the job or as a result of the job.
What is Workers' Compensation?
Workers’ compensation, commonly referred to as “workers’ comp,” offers essential benefits to employees who sustain injuries or fall ill as a direct result of work-related incidents. This important safety net encompasses a wide range of support, including coverage for medical expenses and healthcare benefits, compensation for lost wages during the recovery period, educational retraining opportunities for those needing to shift their career paths, and disability payments for individuals who may not be able to return to their previous roles.
This program is mandated by state governments, ensuring that workers receive the necessary assistance, but it is important to note that the benefits provided can vary significantly across different states. For example, Texas stands apart as the only state that does not require employers to carry workers' compensation insurance, which can lead to unique challenges for workers in that region when seeking compensation for job-related injuries or health issues.
Workers' Compensation Benefits
Workers’ compensation requirements differ from one state to another, and not all employees are covered in every state. For instance, certain states exempt small businesses from the coverage mandate, while others impose distinct requirements based on industry. The National Federation of Independent Business (NFIB) provides a comprehensive summary of the workers’ compensation regulations in each state.
Lost Wages and Disability
Workers’ compensation pays for lost wages to an employee but at a reduced amount, meaning less than your total salary. Typically, programs pay about two-thirds of the worker's gross pay.
In many cases, the worker cannot return to work due to the injury, called temporary total disability, and gets compensated while recovering. The worker returns to the job following a period of rehabilitation or therapy. However, some workers get compensated for longer periods if they suffer some type of permanent disability, whether partial or full disability.
Workers’ compensation benefits are not usually taxable at the state or federal level, compensating for much of the lost income.
However, you may pay taxes on your workers' compensation benefits if you also receive income from the Social Security Disability or Supplemental Social Security programs.
Healthcare Reimbursement and Survivor Benefits
Most compensation plans provide coverage for medical expenses exclusively tied to injuries sustained as a direct consequence of employment. For instance, a construction worker may file a claim for an injury resulting from a fall off scaffolding, but not for an injury sustained while commuting to the job site. In other cases, employees can receive something akin to sick pay during their medical leave. If a worker passes away due to a work-related event, their dependents become eligible for the workers' compensation benefits.
Recipients Waive the Right to Sue
By accepting workers’ compensation, employees relinquish their right to pursue legal action against their employer for negligence. This arrangement serves to safeguard both parties. Employees forfeit additional legal options in return for assured compensation, while employers agree to a level of liability, thereby escaping the potentially higher expenses associated with a negligence lawsuit.
