If you own a business, no matter what its size, and you haven’t purchased workers compensation insurance, then you could be at risk of facing huge penalties that rage from steep fines, to a stint behind bars.
Isn’t workers compensation insurance an unnecessary expense for a small business?
Managing a small business can place a lot of demands upon your limited finances, particularly if you’re just starting out, and it can be tempting to look for ways to minimize expenses. However, whether you believe the risk of accident or injury at your workplace to be minimal or have never had an employee be hurt at work before, it doesn’t pay to be complacent. Depending upon the state that your business is in, there are a range of legally enforceable penalties for those companies not holding this type of insurance, which could prove crippling for a small business.
Is workers compensation insurance mandatory in all states?
While it isn’t mandatory in every state, most require businesses to carry it once they employ a certain number of workers. With thresholds varying from state to state, most mandate that employers purchase it as soon as they take on their first employer, while those that don’t, require that it’s purchased once the company has as many as five employees.
It’s important that if you’re running a small business with one to five employees, you check the legal requirements for your state, and if you have more than five employees, there is little doubt that you’ll need workers compensation insurance. If you’re found in violation of the law, you could face charges of fraud as well as other penalties.
What are the penalties for not carrying workers comp insurance?
The penalties that are often applicable for companies can vary from state to state, but here a few examples:
New Jersey – not carrying workers comp insurance is a criminal offense in this state, and punishable by a fine of $10,000 or a jail term of up to 18 months.
California – while the penalties in this state are similar, the fines can reach as high as $100,000.
Illinois – carrying a misdemeanor charge in Illinois, failure to have this insurance is considered a felony if the employer is deemed to have wilfully failed to purchase it.
Pennsylvania – a felony of the third degree, intentional noncompliance can see employers facing fines of $15,000 and a jail term of up to seven years.
Who enforces the laws surrounding workers compensation insurance?
Typically enforced by local law enforcement and business regulatory bodies, government bodies
that focus on insurance fraud, may also become involved.
Whatever the size of your small business, it doesn’t pay to neglect your responsibilities when it comes to workers compensation insurance. If you need more advice or guidance about the issue or want to purchase insurance for your business, reach out to a professional payroll company who can make sure that you’re legally compliant, whether you have one employee, or one hundred.