How Does Workers' Comp Work? A Complete Guide

By Indeed Editorial Team

Updated September 8, 2021 | Published April 3, 2020

Updated September 8, 2021

Published April 3, 2020

Workers' compensation, also known as “workers comp” or “workman’s compensation,” is an important part of your benefits when working in certain industries. It ensures that your employer will help pay for medical costs and lost wages in case you are injured or become ill on the job. In this article, we explore the key elements of workers' compensation and explain how workers' comp functions for employees and employers.

What is workers' compensation?

Most states require employers have workers' compensation insurance coverage for employees who experience work-related injuries or illnesses. The requirements vary by state but they all aim to provide support when a person’s job impacts their health. Workers' compensation contributes to medical bills, treatment and lost wages when someone is unable to work due to their condition.

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How does workers’ comp benefit employers?

Since employers are responsible for injuries and illnesses at their company, workers' compensation insurance reduces their financial liability, regardless of who is at fault for the injury or illness. Employers rely on their workers' comp insurance to pay for medical, legal and other related costs if an employee is injured or sick from a work-related cause. Without workers’ comp coverage, the company could be financially responsible for the employee’s health care, rehabilitation and lost wages.

Workers' comp also holds employers accountable for their employees’ safety and can encourage a safer work environment with awareness and procedures to avoid common workplace injuries. Some insurance programs include liability coverage, in case an employee sues the company over their injuries.

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How does workers’ comp benefit employees?

Workers’ comp pays out benefits to employees with work-related injuries or illnesses. It allows them to receive care and treatment and then return to work without significant financial strain. The coverage typically provides access to vocation rehabilitation, compensation for permanent injuries and survivors’ benefits.

Workers' comp promotes prompt reporting when an employee gets sick or injured, encouraging people to get medical attention immediately instead of waiting. Some policies offer additional benefits like rehabilitation services, compensation for permanent injuries and free health and safety training. Keep in mind, though, that actual benefits depend on the nature of the injury or illness, state requirements and the specific policy.

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What situations qualify for workers' comp?

If your employer has workers' comp insurance, any work-related injury or illness can qualify for benefits and reimbursement. Most policies allow for compensation regardless of who was at fault.

Employees may receive workers' compensation for chronic injuries and illnesses and those that happen suddenly. For example, an employee may be compensated for a repetitive use injury like carpal tunnel.

Workers' comp also covers situations that occur in work-related contexts, such as during business travel or company events. If you are not sure if your illness or injury qualifies as work-related, ask your employer or contact a workers' compensation representative.

Who can receive workers' comp?

While all states have some form of workers' compensation programs, not all employers are required to offer workers' comp insurance. The coverage cost is paid by the employer. Not all employees are covered by workers’ comp depending on state regulations. These employees may include:

  • Independent contractors

  • Seasonal workers

  • Farmers and farmhands

  • Volunteers

  • Railroad employees

  • Businesses with less than a certain number of employees. The number varies by state.

Again, depending on state rules, certain situations may not be covered such as:

  • Injuries or illnesses that are not work-related

  • Injuries sustained during a commute to and from work

  • Intentional injury

Most employers post information about workers' compensation in the workplace. Employees can learn more from Human Resources or the employer. To learn more about state requirements, contact your state, and you can learn more about whether you qualify for workers' comp by asking your employer directly. To learn the requirements for workers' comp in your state, reach out to the state your local workers' compensation office.

How to make a workers’ comp claim?

Workers' compensation works by allowing employees to access benefits from their employer's insurance provider. Some states have a complex process but most employers will help guide you through the claims process if you suffer from a work-related illness or injury.

1. Alert your company

If you experience a work-related injury or illness, alert your company’s Human Resources or appropriate department as soon as possible. An incident report will likely be made.

If it’s an emergency, seek help or care immediately.

The window for reporting and initiating a claim varies by state. Some states require you to inform your employers within three days while others offer up to a year for occupational illnesses and injuries.

Knowing your company’s processes and your state’s requirements will help you understand the procedure and meet any claim timelines.

2. Visit a doctor

Some policies may only cover visits with certain approved health care providers, so check your company's requirements before going to the doctor. If the doctor is aware that it’s a work-related cause, a medical report will be provided or sent directly to the employer’s insurance company.

If it’s an emergency, seek care immediately.

You will likely pay for your medical expenses upfront, and then, be reimbursed by the insurance company. Your employer's insurance company may pay your health care provider directly in some circumstances but you should still be prepared to pay for your initial doctor's visit.

3. File a claim

Once you seek treatment, you can begin the claims process. Your employer will provide you with the necessary forms and information. They will let you know to contact their workers' comp insurance carrier.

You will be required to fill out state-mandated forms and possibly provide medical history and treatment. After a processing period, you will begin receiving payments for your medical expenses and other benefits. For example, you might receive, two-thirds of lost weekly wages for being out of work. Receiving long-term disability benefits may require additional forms.

Claims can be disputed if your employer feels that your injury or illness was not work-related. The dispute process varies by state. It may require that you appear before a panel or workers’ comp agency that will make the final decision.

Once a claim is settled, you have no rights to coverage for future medical bills.

4. Return to work

If an employee needs to take time off to care for their health after a work-related illness or injury, they will be able to return to their job or a comparable position after a certain amount of time.

Depending on the suggestion of your health care provider, you may be able to work part time while still receiving partial wages as you transition back into the workplace. Employers are responsible for changing workplace procedures to prevent similar illnesses and injuries in addition to accommodating employee needs when they return to work.

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