How Workers Compensation Works

Workers compensation is designed to cover workers for all on the job injuries.

Photo courtesy ©2007 Microsoft Corporation

Workers Compensation Benefits

Workers compensation provides workers who are hurt on the job (or their families, in case of a death) with a predetermined level of compensation. The benefit of this type of program is that it removes the burdensome and costly process of litigation (dealing with a lawsuit) and provides guaranteed benefits for workers. The basis of workers compensation is an idea called a compensation bargain or exclusive remedy. Injured workers give up most rights to sue employers for injury in exchange for clearly defined benefits in case of injury or disability. As part of the bargain, employers aren’t allowed to give lesser compensation if a worker is found negligent or liable.

Most of the 55 different workers compensation programs that exist in the United States are state-run. These programs vary in terms of compensation and benefits, including which injuries and illnesses are covered. There are also more than 1,200 commercial insurers operating in the U.S. Most employers are required by state law to have workers compensation insurance.

Most workers compensation programs pay for medical expenses, repay most of lost earnings, and pay for the loss of future earnings or provide vocational rehabilitation (training for a new job or occupation, physical therapy, etc.). When a worker is killed, funeral costs are generally paid and survivors may get wage-replacement benefits. In the case of injury, workers receive immediate compensation for their medical expenses and then receive cash benefits for lost work after three to seven days.