6 big workers' compensation mistakes (that could cost your business)

6 big workers' compensation mistakes (that could cost your business)

Business owners often don’t think about workers’ compensation insurance — until there’s a problem. But what you don’t know about this often-required type of business insurance is that it can get expensive fast. Do part-time workers need to be covered? How about remote workers? Is there a deadline to report injuries? NEXT shares the six most common mistakes made around workers’ comp and tips to help avoid fines, lawsuits or a denied claim.

1. Some commonly overlooked injuries can lead to claims

Not every injury looks dramatic — and that’s exactly why some of the most common workers’ comp claims get overlooked. Small businesses often assume workers’ comp is only for major accidents. But it can also apply to quieter, everyday risks that show up in offices, retail shops and even living rooms (if they’re your place of business).

Here are a few examples that catch many business owners off guard:

• Musculoskeletal disorders (MSDs): These include carpal tunnel, tendinitis, back strain and sprains. According to the Bureau of Labor Statistics, about 30% of U.S. private‑sector injuries were MSDs.
• Slips, trips and falls: Even in low‑risk spaces like break rooms or behind cash registers, these accidents can cost your business.
• Mental health conditions: These can lead to claims if the mental condition is tied to a physical injury.

2. Know your state’s Workers’ Compensation rules

Business insurance laws vary from state to state. Some require coverage for just one part-time worker, and others don’t require it at all. Always check to be sure you’re compliant with your state’s specific workers’ comp requirements.

Even if you live in an exempt state like Texas and South Dakota that don’t require workers’ comp, that doesn’t mean you’re safe without it. If an employee is injured and you don’t have coverage, you may be on the hook for medical bills, lost wages and legal damages out of pocket.

3. Review your Workers’ Comp coverage at least once a year

A provider that’s familiar with your kind of work can help you choose the right class codes for your industry. This can help you avoid overpaying and stay audit-ready to make the end of the year a breeze.

Your insurance changes as your business grows and shrinks. Update your policy when you hire, expand or shift team roles. Staying proactive can help you avoid premium surprises down the road.

Whatever you do, don’t let your policy lapse. Coverage lapses, even for a day, can cost you. A single day without coverage could be considered noncompliance, which may result in fines or even stop-work orders in some states.

4. Administrative errors can lead to fines

Staying compliant means staying on top of the day-to-day, especially when something goes wrong. Small operational slip-ups can lead to denied claims, increased premiums or even state penalties.

• Train employees to report injuries right away. No matter how minor, a delay in reporting can complicate claims and lead to higher costs. Most states require injuries to be reported within a few days — sometimes within 24 hours. Miss that window, and you could delay benefits or put your business at risk for noncompliance fines.
• Log every injury. Documentation is your best defense in a dispute or audit. Every workplace injury, no matter how minor, should be documented. Without accurate records, you could face problems during audits or disputes over coverage and claim validity.
• Keep records of role changes and payroll changes. Workers’ comp premiums are based on the type of work your employees do. If someone shifts from front desk duties to warehouse lifting — but you don’t update their classification — you could be underpaying (or overpaying) and trigger penalties during an audit. Forgetting to update workers’ comp class codes could result in a financial penalty.
• Don’t skip your annual workers’ comp audit. Most providers check your payroll and job roles every year. Skip these annual audits and you risk penalties. Ignoring them or submitting incomplete data can result in back payments, penalties or policy cancellation.

5. Don’t forget about part-time, seasonal, remote or 1099 employees

Just because someone isn’t full-time doesn’t mean you don’t need coverage for them. In many states, if you have even one employee, you’re required to carry workers’ comp. And if you misclassify a W-2 employee as a 1099 contractor to avoid coverage, it could lead to penalties, back pay and legal action.

If an injury happens during work hours and while performing job duties, remote employees could also be covered if, say, they trip and break their wrist during a meeting.

To stay protected, set clear remote work policies, encourage designated workspaces and document all reported injuries. Your workers’ comp policy may need to reflect out-of-office work. Check with your provider to be sure.

6. Keep your physical work space compliant and up to date

• Post required notices where your team can see them. Most states require you to post a workers’ comp notice in a visible location, explaining employees’ rights and how to report an injury. Skip this, and you could face fines — even if you have a valid policy in place.
• Walk around your business space to look for hazards regularly. Whether your team works in a shop, office or home, look for trip risks, ergonomic issues or signs of repetitive stress. What seems small now could turn into a costly claim later.

Bottom line: Workers’ comp isn’t just about compliance and keeping your costs down; it’s about protecting your people, your reputation and your ability to keep moving forward.

This story was produced by NEXT and reviewed and distributed by Stacker.