How HR Can Make The Case for SMB Workers' Compensation Insurance

HR professionals that work for small and medium-sized businesses (SMBs) face no shortage of challenges in their work. First, they're often made to function as an HR department of one, managing every aspect of the business's employment-related needs, from recruiting and training to onboarding and everything in-between. On top of that, they're typically faced with significant budgetary restraints and management that looks to cut corners (and therefore costs) at every opportunity.

In the US, there's one area in particular where SMBs are apt to do this. It's in making the decision not to carry workers' compensation insurance to cover employees' lost wages if they're hurt on the job. According to one recent survey, an astounding 26% of US SMBs had made this questionable decision, many due to confusion over their state's mandates and exactly what their liabilities are. As you may have guessed, it falls to HR to correct that by making the case to business decision-makers that workers' compensation insurance is worth every penny. Here's how to do it.

Learn the State-by-State Requirements

The first thing an HR professional must do to make the case for workers' compensation insurance is to acquaint themselves with the specific legal requirements of the state(s) their company operates in. It may come as a surprise to some that the requirements vary wildly between states, and in some places, coverage isn't legally mandated at all for certain small businesses. Most of the time, though, any business with more than one employee will have a legal mandate to buy some form of coverage – it's just a matter of how much coverage they have to have. It's also critical to learn how the state laws work for employees that work across state lines, where requirements may be different than where the business is based. Once you have a clear picture of the business's legal requirements, it becomes much easier to make the case to decision-makers (i.e. they have no choice).

Create a Cost/Benefit Analysis

In some situations, it's advisable for a small business to carry more than the minimum legally-mandated amount of coverage. That's because SMBs are more vulnerable to losses related to employee injuries. For example, there's existing research that demonstrates that employees are far more likely to file workers' compensation claims when they have health insurance with a high deductible – and those are exactly the kinds of insurance plans most SMBs offer to employees. That means SMBs can face higher-than-average numbers of compensation claims than larger companies, and the costs of inadequate coverage can be significant. Making this clear with a few hypothetical cases and a cost/benefit analysis can be an excellent way to drive the point home to reticent decision-makers.

Highlight the Benefit to Employees

Although it may not seem critical to management, carrying comprehensive workers' compensation insurance sends a message to employees that their health and well-being matter. Right now, that's a big deal because today's top employers place a heavy emphasis on employee wellbeing, and any business that doesn't is at a significant disadvantage in their efforts to recruit and retain top talent. That means HR can frame their case for comprehensive workers' compensation insurance as a decision related to the competition for labor. It can also be highlighted to potential new hires as part of their overall compensation package as long as you make sure your business circumstances don't make workers' compensation taxable in your state.

The Bottom Line

For HR, making the case for workers' compensation insurance for an SMB shouldn't be difficult. Any of the three approaches above (or a blend of all three) should be enough to do the job. After all, like all other forms of business insurance, it makes good sense to have it rather than risking an unexpected large expense if anything happens to an employee. In short, every dollar an SMB spends on their insurance premiums is a hedge against disaster, and that should make a decision in the affirmative an easy one to make.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.