One of the finer points of being an employer is workers’ compensation. According to Arizona State law, any business that has employees is legally required to carry workers’ compensation insurance. It does not matter what kind of business you are registered as, be it a corporation, LLC or proprietorship; if you employ people, you must carry coverage.
Managing workers’ compensation can be time consuming and expensive. While it is a part of doing business and a safety net that makes employees more comfortable, the fact is it would be easier to have someone else handle it for you. Let’s go over your options for carrying workers’ compensation insurance in Arizona.
- A State Licensed Provider- Arguably the easiest way to approach workers’ compensation insurance (aside from having us handle the detail for you of course) is to purchase a plan through an approved provider. Many companies are licensed to provide this coverage to business owners in Arizona. If you would like to find out more about individual companies who are licensed, contact the Arizona Department of Insurance. These companies will price out a plan for your business based upon several factors including:
- Your total number of employees
- How risky they asses your industry to be
- How your business stacks up against competitors in your industry from a risk standpoint ( this is called Experience Modification or E-Mod)
- Do it Yourself- If you are the detail-oriented type, and can show the state that you are capable, you can apply to provide your own workers’ compensation coverage in Arizona. Aside from the obvious extra work that this route requires, you must also give your employees the legal right to reject your coverage.
Now that you have spent the time to set up workers’ compensation–and consequently spent less time on your core business functions–you will need to think about the future. Your insurance will be responsible for paying out almost every time an employee is injured or falls ill due to a work-related cause. Arizona is a “no fault state,” meaning that even if the injury or sickness is directly caused by the employee, your insurance will pay out so long as the employee didn’t intentionally injure himself. In the event of an injury, you can expect to devote more time to workers’ compensation. If a staff member is injured on the job:
- You must provide them information about your insurance carrier and then contact your carrier to notify them.
- You can refer them to your preferred medical provider for an initial check-up, but after that employees have the right to seek medical care from their preferred providers.
- You can expect to have your premium increase as your insurance coverage will likely be paying for both medical care and up to 2/3 of your employees’ wages for any time that they are not available to work due to the injury.
- Be sure to keep in touch with the employees’ medical care providers so you know the extent of their injuries, how long they should be out if work, and what to expect your insurance provider to report back to you.
- Keep up with injured employees to make sure that they are being diligent in focusing on treatment and healing; if they are not, you will end up paying for a lot more medical bills.
Keep in mind that you will need to stay on top of workers’ compensation coverage. Aside from taking the time to cut a check every month, you should be actively in contact with your insurance provider. Remember, if you choose to incur the cost, it is your responsibility to manage it and keep it reasonable.
- Make sure that your provider is updated if you have any changes to your business, whether that be to the number of staff or the types of operations you are involved in due to expansion or discontinuing particular operations.
- Make sure your provider closes claims on time so that you do not have extra costs on your books.
If you choose to have employees, you will want to stay on top of workers’ compensation. If you are found to be out of compliance by the state you can expect:
- Fines for not having coverage: The fines start at $1,000 and go up to $10,000 in a 5 year period if you do not comply.
- To have your business shut down by the Industrial Commission of Arizona (the government entity that oversees workers’ compensation) until you are in compliance.
- To be sued by an injured or under-informed employee. If you do not have coverage, or fail to inform an employee about their rights involved in self coverage, you can expect to be hit with a civil lawsuit. If you lose the suit you might have to pay medical costs, lost wages, legal fees (yours and the employees), pain and suffering or any other costs that the courts deem necessary. Remember it is a class 6 felony to not carry workers’ compensation insurance in Arizona.