Who Pays for Workers’ Compensation?

The latest U.S. Bureau of Labor Statistics data shows that at least 2.6 million private sector workers suffered non-fatal injuries or illnesses nationwide in our country in 2023. That number is quite staggering, and hearing it may lead you to wonder who pays for workers’ compensation in light of the fact that payouts have to be significant in cases where catastrophic injuries occur.

Understanding What Workers’ Comp Is

First things first, let’s discuss what workers’  compensation is. It’s a type of insurance. And, unlike auto insurance, where in many states, one party must be named as an at-fault party, and you file a claim with their insurer, that’s not how workers’ comp works.

Workers’ compensation is a no-fault type of insurance, meaning no matter your state and whether you caused your own injuries or someone else did, you may be eligible to receive this type of employment benefits. There are a few exceptions to this general “rule of thumb,” though, including getting hurt when engaging in horseplay or suffering an injury at the time of the commission of a crime, for example

Also, you have to be an actual employee to qualify for workers’ comp. Each state also has its unique rules for which employers and employees must be covered.

As for its purpose? Workers’ comp exists to protect employers from being “personally” sued if their employee suffers an on-the-job illness or injury. Without this insurance coverage, many employers would not have the means to afford to respond to potential employees’ injury claims. This coverage keeps them from being financially devastated by making payouts for medical care, paying for wage replacement, etc.

The Responsibility for Paying for Workers’ Compensation

So, now that you better understand how workers’ comp is a type of insurance and understand why it exists let’s discuss who foots the bill for this coverage.

You may assume the government, whether your state or federal officials, pays for this coverage since they require most employers to have it. However, as you may imagine, paying for workers’ comp insurance for all businesses would be quite costly for government agencies to do. So, they definitely do not take care of it, except in rare cases where government jobs are involved. However, in many cases, state and federal employers have specialized workers’ comp programs for their employees.

That being said, who likely paid for medical care, wage replacement, and other losses those 2.6 million injured workers had in 2023, as discussed above? In the majority of cases, it was likely a private party or state-mandated insurer. In those cases, it was a party to which your employer paid monthly premiums to be able to readily offer you compensated medical payments and wage replacement if you got hurt on the job.

As you may have noted above, we mentioned that in the “majority” of cases, employers paid an insurer. In some instances, employers are self-insured. The way those situations work is that an employer typically purchases a surety bond, which is backed up by a set amount of funds that serves as good faith that they will “pay up” should an employee get hurt and incur accident-related expenses. So, in some cases, employers do actually foot the bill for workers’ comp claims themselves.

Why Who Pays for Workers’ Compensation Matters

So, why does who pays on worker injury or illness claims matter anyway? It does for a few different reasons, including:

• It will likely affect who you file your workers’ comp claim with
• It may impact what type of compensation you’re entitled to if you were hurt on the job
• It will dictate who you may be able to pursue if workers’ compensation payments suddenly stop or your claim is denied altogether and you need to file an appeal

Each of the situations above can be hard to navigate when you’re hurt or ill and you’re simply trying to recover, which is when it can be helpful to consult with a workers’ comp lawyer for advice.