312: What’s the Deal with Workers Comp?
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Summary
What is Workers Comp and what do we need to know about it? Running a business means managing risk! We look for health insurance, liability insurance, and auto insurance, but what covers work related injuries? While the exact coverage and requirements are different for each state, workers compensation has some fundamentals everyone should know. We break down 5 of the most common questions we see about workers compensation. Plus, business coach Natasha answers, ”How do I get better at implementing my plans, instead of just thinking about them?”
Main topics:
What is workers compensation?
Types of benefits
5 major questions
Ask a Biz Coach
Main takeaway: Workers compensation requirements vary by state, but you should absolutely look into adding it, even if you’re not required to do so.
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A VERY ROUGH TRANSCRIPT OF THE EPISODE
Provided by otter.ai
SUMMARY KEYWORDS
cover, payroll, work related injury, pay, state, required, employee, business, disability benefits, benefits, pet, coverage, questions, broker, company, insurance provider, workers, run, insurance agents, estimate
SPEAKERS
Meghan, Collin
Meghan 00:10
Hello, I'm Meghan. I'm Collin. And this is Pet Sitter confessional and open and honest discussion about life as a pet sitter. Hi, there, it's episode 312.
Collin 00:21
healthy and happy a generic time of day.
Meghan 00:26
Thank you to pet sitters associates and our Patreon members for making this show possible. If you have learned something, or gotten something of value from the past 311 episodes, we would love for you to join us over on Patreon and support us with a few dollars every month so the show can keep going. Yep, go
Collin 00:43
to Petsitterconfessional.com/support.
Meghan 00:46
So today's topic is not a super fun one kind of dry, not very sexy, but super necessary to our businesses. And we had to cover it had not covered it yet. So we're going to do so today. Absolutely. So workers compensation, you've probably have heard of it, you may even have it. But it's a form of insurance that provides benefits to workers who are injured or become ill on the job. If you've been an employee in the past, which I'm pretty sure we all have, you have likely been covered by this. It helps compensate for medical costs and lost wages while you or your employees are out of
Collin 01:22
work. So today, we're gonna go over some common questions around worker's comp, but it's certainly not extensive. And as an important side note here, Megan and I are not experts in this at all, we are not insurance agents. This is all information that we've learned and accrued by asking questions and doing it ourselves and doing it ourselves. Additionally, rules for workers compensation vary from state to state. So for your specific needs, go to your state's division of employment or your employment security office to ask questions about what your requirements are, and what specifically is covered under a workers compensation policy, where you live and operate your business.
Meghan 02:06
So we're gonna break down some questions. And the first one is, is it required, you're going to hear a lot of this on the episode probably, but it depends. So in California, if you have one employee, you have to carry it, it is a law, we are in Missouri, and you only have to carry it once you reach five employees. So again, varies by state. And other than Texas, every state mandates that companies carry workers comp insurance, either through a private insurer or the state, or the business can elect to be self insured themselves. And what
Collin 02:37
self insured means is that you as a company are going to place up enough money to cover an incident if it occurs, this is usually only done by extremely large corporations or ones that have a lot of financial backing.
Meghan 02:49
So each state has different rules regarding what's covered, or how issues are evaluated, what medical care is going to be delivered and how it's delivered, and then any benefits an employee can receive. So it again, it's important to check your state's regulations. And if you don't, if there's a failure to carry the required insurance, they will obviously the government's gonna come for your money, and they're going to force you to pay any back penalties that you didn't pay for, or any out of pocket benefits that need to be rendered.
Collin Funkhouser 03:21
There are the legal requirements here. But then there's also just taking care of your team. So while you may not be legally required to have it until you have five people or whatever that is, you may actually choose to have it for your very first one, because you want to make sure that your team members, your staff, your employees are cared for that they are taken care of that they are have some security in working for you. This is a kind of a pretty intensive job doing pet sitting and dog walking. And as an employer, we want our staff to have peace of mind and not have to worry about us really, we don't want to have to worry about being sued in case there's something that goes wrong.
Meghan 03:58
Or even if you don't have a team as well, we're going to talk about this in a little bit. But this is great for solo people too. Because we're you know, day in and day out walking dogs and light things happen.
Collin 04:08
Exactly. So you can think about, okay, I might not be legally required. Is this something that I can financially do and take care of my team for this one aspect of their lives? And that's going to be up to you or your CPA? Or how are you have that working out? But I think it is an important question to step back and ask, maybe this is something that I should do.
Meghan 04:27
So then you go into well, where do I get it, you can go through a private company or a state program, but we recommend going through a broker to get multiple quotes from several different providers.
Collin 04:38
So contact an independent business insurance agent and remember, once they start looking for quotes for you, you as the business will be locked out from getting quotes from other companies if you go to a different broker, so make sure that you like that broker you like that person that you're talking with in the customer service that you provide that they provide before you go through the entire process. So what this means means you go to the broker, you go to that person, that independent insurance agent. And that's just like a simple Google search, right? Absolutely. You search business insurance agents or business insurance company, that's going to be what's called a broker, you contact them, and it should be in your same state. Right? Absolutely. Because they're going to know how to fill out all of the forms and the questions to ask, you contact them, they're going to ask a bunch of questions about your company, how you operate, expenses, all of these kinds of things, to get some idea of what that how they can start filling out forms from these private insurance providers. And once they go to them, and they submit your information. They are prohibited from giving out another quote to a different broker, if you ask them. So sometimes this goes on for three months, sometimes it's six months, sometimes it's up to eight months, just depending on the company. And why does this happen? Well, business insurance is actually run differently than private insurance. And basically, it helps the insurance companies keep track of who is applying for what, so that the quote is as accurate as possible.
Meghan 06:01
But it can be really frustrating. Yeah, if I can't go to somebody else, because I, you know, they're I'm locked out.
Collin 06:07
Yeah, this happened to us, when we started going through this process of getting workers comp, we didn't really like the customer service that we were getting from the broker that we were working with. And we tried to go to a different broker, but they could not pull quotes from five or six of the companies, because they had been locked out. So we actually had to wait a while to get different quotes from them.
Meghan 06:28
The third big question about workers compensation is how much does it cost. So this is a tough one. Because again, each state has different requirements for coverage. So there is going to be some variation, but it's also dependent on things specific to your business. So how long you've been in business, if you've had any issues in the past, what industry you're in, and all those type of things. And that's why working with a broker is so helpful, because you'll need to describe exactly what we do, which is interesting to the person on the other end of the phone, because they most times have no idea what we have to do what we do, and you have to explain it over and over again, and really trying to pieced out what terminology they're using and make sure it lines up
Collin 07:10
exactly. And they may say, oh, you're a dog trainer, because dog trainers actually have a different coverage and a different rate than a pet groomer than a boarding facility than a daycare facility, then then a pet sitter then a dog walker than a house sitter, all of those have different codes. And that's what they're going to do, they're going to look up an industry specific code for you, and determine what that rate is.
Meghan 07:31
So just because you say, I'm a pet sitter, they're not really going to know what that means. If you strictly only go into people's homes that is going to be coded differently than somebody who boards in their home sometimes,
Collin Funkhouser 07:43
right? Yep, exactly. That's going to have different things. And I know that some companies are not going to be willing to take on the liability of somebody going into home after home after home. Some companies are going to want to have you take dogs into a facility they they're, they're comfortable taking on that amount of risk. Yeah, brick and mortar. Yeah. So they it that's why the broker is so important, because they are going to go across a huge swath of companies and figure out, Where can I get the best rate for the service that you provide? So for us, our rate is $3.33 per $100, in payroll. And again, that rate is determined on how we run our business, the risk that that insurance company was willing to take on us and how long we've been in business, all that kind of those kind of things. So if we run $100 in a month, we're going to pay $3.33 for workers compensation insurance for that month. If we paid $1,000 in payroll that month, we'd pay $33.30 for that month,
Meghan 08:43
but in the beginning of all this, when you're filling out the paperwork, you have to tell them an estimate of how much payroll you think you're gonna run. Yeah, which is really,
Collin Funkhouser 08:50
really obnoxious, especially if you are really brand new to having staff members, and you've never run payroll before you have no clue. So you can give them an estimate of what you think that you're best estimate. And for Missouri, at least the insurance companies that they were working with, for us, they found that there is a minimum amount of payroll that they require to be insured at some times. So if we said okay, well, we're gonna we think we're going to run $10,000 in payroll, they may go, that's not enough for, for us to insure you. So we're going to bump you up to the minimum price, in order for us to cover you. So you're actually going to be overpaying for that coverage. But again, it's all about assessing the amount of risk that you're willing to take on for your business and your staff.
Meghan 09:34
But if you are already doing all the dog walks in the Pet Sets, and you're handing over either a percentage of those, or you know the number that you're going to be giving to your staff, you can have a pretty good idea of what number you're going to be running in
Collin 09:48
payroll, exactly. You can get some estimate from that and give your best estimate. So this kind of goes into a sub question for how much does it cost? It's how do you pay for it because you actually have several options. The first First one is annually. Basically, you estimate how much payroll you'll run for the entire year, and you pay the full amount of workers compensation for the year in one lump sum, then there's monthly, so you estimate again, how much payroll you're going to run for the year, divide that by 12. And that's the amount that you're going to pay each month. And this is typically the most popular and what most companies do, then there's the pay as you go. And this is increasingly a popular option, but it does take some work. So you can do this manually, where each month you calculate how much you've paid in payroll, and then submit that number to your insurance provider, they'll auto calculate how much you owe for that particular month, and then you can pay him. Additionally, some insurance providers can incorporate into your payroll directly. And so your payroll company can do this for you and submit all of your documents and pay this for you. So it can be automatic, this is an option with gusto it is and gussto makes it really easy. So the gussto partners with a company to make this work so they can integrate it. And as you are running payroll, your workers compensation is being calculated in run for you. We really do love the the this option of pay as you go whether you do gussto Or you do it by yourself, because it means that we are never overpaying for a month where we're not running as much payroll because there are slow periods and there are really busy periods. But it does mean more work. Yep, it is more it's more is more hands on. So that's a judgment call for you to make about how involved you want to be with us and how much your time is worth
Meghan 11:32
well, because also you will be audited. At the end of the year. Hurray. Everybody loves an audit, you get an audit and you get an audit, not by the IRS or by the state, but by the insurance provider. So they are going to request all the actual payroll numbers that you did run and then they're going to compare them to what you've paid. And they're either either going to give you a refund, yay. Or they are going to require you to pay them if you underpaid. So then really the Pay As You Go option may not necessarily be that much more beneficial. Because it seems like it's just more work
Collin 12:05
it is but you don't have to guess am I going to get a refund or am I not unless you are independently tracking that each month, which again is something else you have to do. So that's another thing. If you have the monthly where it's not pay as you go, but you've just taken the 12, the year divided by 12. And you're paying that you do need to be keeping track of how much payroll you're actually running, and possibly setting aside money if you are continually going over your estimate because you're at the end of the year you will owe money. So you still have to track this no matter what and there is paperwork involved.
Meghan 12:39
Something you won't get audited for is pet business insurance. As pet care professionals, your clients trust you to care for their furry family members. And that's why pet sitters Associates is here to help for over 20 years they have provided 1000s of members with quality pet care insurance. Because you work in the pet care industry, you can take your career to the next level with flexible coverage options, client connections and complete freedom and running your business. Learn why pet sitters Associates is the perfect fit for you and get a free quote today. At pets@llc.com. You can get a discount when joining by clicking membership Pet Sitter confessional and using the discount code confessional at checkout to get $10 off, check out the benefits of insurance and membership once again at pets@llc.com. Another big question that we think of when we think of workers comp is what does it cover? Which again, it depends, hey, there's that word again. Workers Compensation really falls into four different categories. So it's medical benefits, disability benefits, rehabilitation benefits, and then unfortunately, death benefits. This is where working with an agent, specifically one on one can be so helpful because you can ask about the coverage in your specific situation. You know, we've had business owners talk about how overnight care wasn't actually covered by their provider and they were kicked off the plan because the insurance provider found out they were offering this and they said okay, we don't we're not going to cover this bye bye. So talk with them. Don't be afraid to ask all kinds of questions, especially before signing up. Really read the document that you're going to be signing and make sure that you know all the i's are crossing T's are dotted.
Collin Funkhouser 14:14
Exactly. So staff are required to report an injury to you and then you are the one that's required to file a claim with your policy. So Megan mentioned the four benefits of medical disability rehabilitation and death. medical benefits may include reimbursements for doctor's visits, hospital or emergency room care up to surgery, medications, physical therapy, even it may cover things like equipment such as even crutches, wheelchairs, and then there are benefits that can include chronic pain management.
Meghan 14:45
And so these medical expenses are generally covered until the injured worker reaches the MMI. So that's the maximum medical improvement, which is the point where you know additional treatment won't really further improve their condition if they've kind of reached a plateau in their physical therapy.
Collin Funkhouser 15:03
The second kind of coverage are disability benefits. So if an injured employee is unable to work, disability benefits can replace part of their wages lost from a work related injury. For employees who need time to recover or seek medical treatment, disability benefits can replace some of their lost income until they're back on the job.
Meghan 15:20
And if it's a really severe injury, and they are permanently disabled, the workers comp could kick in for their entire life.
Collin 15:27
Yeah, but some states do limit workers comp disability benefits to a specified number of weeks or a maximum dollar amount or until the employee reaches a certain age. So again, this is where you need to be aware of what your policy covers, so you can communicate these to staff before they get into that situation.
Meghan 15:46
And then there are rehabilitation benefits. So these are vocationally appropriate because they provide support for injured workers who are permanently disabled and unable to return to their former job. So these are things that are likely never to happen to dog walking pet setting companies, but they may
Collin 16:02
they usually cover things like additional job training, skills, Assessment and Testing. Things like resume assistance and development and placements tuition if they decide they need to go back to college or get more education, and then even books or other expenses associated with that these specific benefits are supposed to help retrain the injured employee so they can try and earn what they weren't earning with your company, but just at a different position. And these are required by most states and actually may include up to two years of additional training or education in some circumstances.
Meghan 16:37
And then there's the death benefit. Not everybody's favorite, but it's sometimes called survivors benefits, or it's kind of similar to life insurance. So if an employee dies from a work related injury, not super fun to talk about, but it could provide benefit to their dependents or spouse or whoever else is living in the household. It can be used to pay for burial costs or funeral expenses. And this can be applied to nearly every state, but again, it varies by state, so it can help cover lost income, and can maybe even be paid in installments or in one lump sum. The final question is a big one, especially for solopreneurs is Can I include myself? Or should I include myself? We have been asked this question a lot, and many sole proprietors are not required to purchase workers compensation insurance, but it may be beneficial to do so if you are doing 14 visits a day, and they are all dog walks and you are just out there pounding the pavement, going from house to house all the time, you know you there is a likelihood that you're going to be injured on the job.
Collin Funkhouser 17:37
And really importantly, here most health insurance policies, most health insurance providers might deny a work related injury. So having worker's compensation on top of your personal health insurance is essential to cover those work related specific costs. So if you've never asked your health insurance company, if they would deny or what or how they would handle a work related injury as a self employed person, that is a phone call that you need to make today, to understand where you are going to be
Meghan 18:09
ultimately so that you can determine what kind of risk you want to take on. If you are trying to step away and hire, then you may just want to cover your employees or if you love the day in and day out dog walking, then you may consider having coverage for yourself.
Collin 18:25
And this is all about managing liability and where that lies. So even as a self employed person, as a sole proprietor, you may have clients that will require you to have your own workers compensation coverage as a way to limit their liability. Yeah, I
Meghan 18:41
will say in our 10 years, it's never happened. But I can definitely see where some high end clients, if you're going into their homes, they're gonna want this Yeah,
Collin 18:48
so that you don't end up suing them and their home insurance policy for injuries related to the work that you were doing.
Meghan 18:54
And it could be even something as simple as it's icy out one night and you slip and fall on their sidewalk or right in front of their front door.
Collin 19:01
Yep, that would not be covered under your health insurance, because it's a work related injury. And instead, you may decide I'm going to sue the homeowner Well, I very much doubt that the homeowner would have agreed to enter into a contract with you had they known that you could potentially sue them for injuries that happened on their property and that you weren't covered. So these are things that as businesses, we do need to really consider about what risk we're placing ourselves. What risk are we putting up our clients to based off of us coming and going. So if you have employees, and you still are doing work, like Megan mentioned earlier, you can add yourself, but at least in our research, it can be quite costly. So I know in Missouri, if Megan and I wanted to add ourselves to our company's work compensation policy, they would add an additional $90,000 in payroll to the estimate that we would have to pay on. Why $90,000? Well, it's required by statute and law or whatever, that they add 45,000 dollars in payroll per owner who gets added to the policy, and no less, and we are both owners 5050. So it is is a minimum amount that they have to add. Even if you don't actually make that much from your company, they have to add that to the policy as requirements. But again, as with all insurance policies, we've talked about this a lot on this this very episode. In every other episode, we've mentioned insurance, it's all about managing risk, and taking on what you're comfortable with. So look at how you're covered, where you're covered, and what you can afford to take on and what you can build in to cover your clients, your staff, and yourself.
Meghan 20:41
So hopefully, this 30,000 foot view of workers comp was beneficial. I know again, it varies state by state. Yeah, and basically almost broker by broker. So you really need to get somebody specific in your local area that you can talk to. But we would love to know how you have worked through this, who you use, how you have gone about filing any claims that you've had, and any feedback that you have in general about this? Absolutely. Business Coach, Natasha banya is going to answer How do I get better at implementing my plans instead of just thinking about them.
21:13
So implementation is very important. I believe that implementation comes from a burning desire first to want change. Like, I'm tired of this, I'm sick of it, I'm changing this year, it's gonna happen. And I'm making some changes. So when you have that burning desire to want things to be different, you make the time, you literally are like, You know what, forget this. I'm listening to the podcast today with Natasha and Colin, when I get off this podcast, and I finished my next visit, I'm going to sit down at five o'clock, and I'm going to write this out. They've already told me what to do you write a workflow chart out of what I'm doing every single day where I can cut things off, when does my schedule get busier? When do I start getting last minute bookings. And I'm going to start writing all this stuff down. So I can prevent this in little bit by little bit, I'll start chipping away at it automated SEO program is 12 months on purpose, because it's not done overnight, little bit by little bit, but you have to make intention, like going to the gym, you want to lose weight, well, it's not gonna happen overnight, you got to work on it every single day and stay consistent.
Collin 22:21
And I think part of that, too, is breaking that down into small steps, right, so that it also doesn't become too overwhelming, right? You've got the desire. And sometimes we start looking at the mountain and going, I don't know if my desire is that big. But but maybe I've got enough desire for that first step. And then the second step, and then those small wins kind of snowball into help motivating you further.
22:44
Yeah, looking at the mountain is the worst way to get yourself discouraged. You know, don't look at the end result yet, look at the journey. Yeah, and enjoy the journey. Because if you're just waiting on a result, the business is not always about results, because you're gonna keep changing. That's what we do a lot of testing, we put a system in and we test it, and we see whether it's working or not working, and then we change it again. So that's business you're gonna keep changing on. So you want to have that flexibility, but like you said, Take little small baby steps. Okay, I'm just gonna work on my client side. today. I'm gonna work on my hiring side. Today, I'm gonna work on my social media. Today, I'm gonna work on my marketing plan today, take little baby steps. But remember, this all has to get out of my mind. Like, I can't be the only person who knows what to do. That's the main thing about scrambled eggs in our mind, I have to get this out. I gotta get it in the recipe. I gotta get it in enough formula, I got to systematize it right. All these things mean the same thing has to get out of my head today. Starting today, a little bit by a little bit starting today.
Meghan 23:54
If you would like to join Natasha's monthly membership group, you can do so at automated ceo.com and use the code P SC 24 15%. Off. We thank you for sticking with us through this episode. We know again, it wasn't super exciting, but it is very important and it's something that you should be thinking about.
Collin Funkhouser 24:10
And hopefully you can take start taking some good questions to people, brokers, insurance agents, or just other business owners in your area to make sure that you have the coverage that you think you have so that you don't find a surprise down the road when you actually need this.
Meghan 24:25
Yeah, so thank you pet sitters associates for sponsoring this episode and we thank you very much for listening. Bye
24:30
bye
