Workers Compensation Process: From Accident to Wage Replacement

Every founder dreads this news: an employee has been injured on the job. 

A clock starts ticking, and a deadline-driven process begins. It will determine how your employee is cared for, how their wages are replaced, and how your business navigates the law. 

For many founders, the workers compensation claim process is a black box, full of confusing steps. Understanding the workflow for workers’ wage replacement is important. Missteps can lead to delayed care for your employee, compliance violations, and workers compensation fines.

This guide will lay out the workflow so you can manage the situation with confidence and care.

The First 24 Hours: Reporting and Initial Care

What you do in the immediate aftermath of a workplace injury or occupational illness is important for both your employee’s health and your company’s compliance.

Step 1: Provide immediate medical attention

Your first priority is the employee's well-being. For serious injuries, this means calling for emergency medical services. For non-emergency situations, it means directing the employee to an approved medical provider as indicated by your workers compensation coverage.

Step 2: Document the incident internally

The employee must report the injury to their manager or a company representative at the earliest. You should have a simple incident report form to document the specifics. This could include details around what happened, when and where it occurred, and who witnessed it.

Step 3: File the first report of Injury

This is the official start of the claim. As the employer, you are legally required to complete and file a ‘first report of injury’ form with your insurance carrier within a deadline, often between 24 hours and a few days. Filing this form promptly is non-negotiable. It officially initiates the workers compensation claim.

Claim Review and the Waiting Period

Once the claim is filed, the insurance carrier takes the lead. Your involvement is still needed.

Step 4: The investigation

An insurance adjuster will be assigned to the case. They will review the report, speak with you and the employee, and examine initial medical records to determine if the injury is work-related and covered by your policy.

Step 5: The waiting period

A point of confusion is when the worker's compensation payment for lost wages begins. Every state has a mandatory waiting period, typically three to seven days, during which no wage replacement benefits are paid. 

For example, if your state has a seven-day waiting period and an injured employee is medically certified to be out of work for five days, they will not receive any compensation pay for that time. Communicate this to your employee to manage their expectations.

Retroactive pay: If the employee's disability extends beyond a certain timeframe, the benefits for the initial waiting period are paid retroactively.

How Wage Replacement Works

Once a claim is approved and the waiting period is met, the insurer will begin issuing payments. Let’s examine how the amount is determined: 

Step 6: Determining the average weekly wage (AWW)

The benefit amount is based on the employee's average earnings for a set period leading up to the injury. This includes not just their base pay but also aspects like regular overtime and bonuses.

Step 7: The benefit calculation

The actual worker compensation payment is a percentage of the AWW, typically two-thirds in most states. This payment is also based on state-mandated minimum and maximum weekly amounts.

Note on contractors: Standard employee workers compensation does not typically cover independent contractors. This may seem like a way to reduce your workers compensation costs. But misclassifying an employee as a contractor is a risk.

If a worker you've classified as a contractor is injured and later deemed to be an employee, you could be held personally liable and face penalties.

Simplifying Compensation With HR Experts

The compensation workflow could stress out any business leader. The process needs empathy, legal knowledge, and time to follow through.

DianaHR offers expert HR support for small businesses so you can stay focused on growing your business. Our seasoned specialists go beyond setting up your workers’ compensation payroll codes. They help you actively manage and reduce your workers’ compensation costs.

When an injury occurs, our HR experts guide you through timely reporting to meet all deadlines. We develop safety programs and return-to-work plans that help prevent claims and reduce their impact. We also strengthen your compliance by ensuring employees are correctly classified from day one.

Navigate workers’ wage replacement confidently with HR experts. Chat with DianaHR today. 

FAQs

1. What are the important components of the workers' wage replacement? 

The workers' wage replacement process has components that begin after an injury is reported. The first is the claims review, where the insurance carrier validates that the injury is work-related. Later, there’s a mandatory state-specific waiting period before any payments for lost wages are issued. Then, the wage calculation is typically a percentage of the employee's average weekly wage earned before the injury. Finally, a medical certification from a doctor is required to confirm that the employee is unable to work. 

2. How is wage replacement calculated? 

Wage replacement is calculated based on the employee's pre-injury earnings, known as their average weekly wage (AWW). To determine the AWW, an insurer typically looks at the employee's gross earnings over a set period. The benefit payment is then calculated as a fixed percentage of that AWW, which is commonly two-thirds in most states.

3. What should be the immediate response in case of workplace injury or occupational illness?

The immediate response to a workplace injury or illness should always prioritize the employee's health and safety. First, ensure the employee receives appropriate medical attention. Once the employee is safe, document the incident through an internal report. The employer must file a first report of injury with their workers' compensation insurance carrier.