Worker's Compensation InsuranceThe old saying, “you have to spend money to make money” takes on a whole new meaning when you’re the one in charge of a business. Whether you’re at the helm of a Fortune 500 operation, or you’re just starting up a local company, the expenses that come with this endeavor can be pretty overwhelming. Unfortunately, this leads many to make budget cuts in all the wrong places, like worker’s compensation insurance. To help you make a smart call on this coverage, let’s take a look at the discussion from every angle and find out what’s right for your business.

The Appeal of Turning the Other Way

The appeal of skipping out on worker’s compensation is fairly easy to understand. By trimming down on your insurance expense, you save a few bucks in the immediate future. Naturally, this sounds great – if you’re taking a decidedly short term outlook to managing your business. Unfortunately, such an approach rarely pans out once the unforeseeable, but inevitable, accidents involving your employees start piling up on the job.

Understanding the Consequences

As Entrepreneur magazine’s Joan E. Lisante explains in her review of this form of insurance, there are plenty of serious consequences for employers who try to get by without worker’s compensation. First off, every state in the country, aside from Texas, requires this type of coverage. This means that if you’re not playing by the rules, it won’t be too long before you get a poignant call from Uncle Sam regarding this lack of coverage.

Naturally, the actual penalty levied against your business can vary from state to state, but a quick look at the legislation for California, Minnesota, and New York shows fines ranging from $5,000 to $50,000 per infraction, as well as up to $1,000 per employee per week of noncompliance. Basically, when it comes to worker’s compensation, you’ll be hard pressed to find a state labor department or board that doesn’t place a priority on cracking down on compliance offenders.

Outside of the looming fiscal backlash, there are also less tangible, but just as impactful, reasons for picking up a plan. According to Christina Galoozis of the National Federation of Independent Businesses (NFIB), even if you somehow pull a fast one on the local policy enforcement agencies, some customers and business partners might not want to associate with an organization that avoids worker’s compensation. Depending on how much your organization relies on these industry relationships, this bad reputation could be even more damaging than any financial penalty imposed by your local labor officials.

A Better Long Term Approach

Instead of gambling with the fiscal future of your brand, a better idea is to simply stay in compliance with these laws. There’s really no long term benefit to saving money now, only to come under harsh legal sanctions later. Naturally, there are exceptions in certain cases, like individually owned and operated businesses that don’t require coverage, but once you add even just one more employee to your company, the dynamic shifts drastically in favor of picking up a worker’s compensation policy. As soon as you do this and stop trying to outsmart the law, you’ll be able to focus on the truly important things, like guiding your business toward a successful and bright future.