A Guide To Workers' Compensation Insurance For Temp Staffing Agencies

By October 2, 2023 No Comments

Temporary staffing agencies carry workers’ compensation as a form of legal and financial protection.

If a temporary worker is injured while on the job, workers’ compensation insurance kicks in to cover causally related medical bills and in some cases, financial indemnity.

Temporary staffing agencies that fail to carry workers’ compensation coverage run the risk of an employee becoming injured or ill on the job and suing the agency for financial compensation to cover all causally related medical care, lost wages, and possibly even diminished earning capacity.

Moreover, in the rare event of death that occurs on the job or as a result of workplace duties, death indemnity payments will likely be made available through a workers’ compensation claim.

Death indemnity payments are payable to the deceased worker’s dependents.

Such financial compensation typically includes the cost of the funeral in addition to death benefits.

Though unlikely, there is the potential for temp staffing agency workers to take legal action against the direct employer in the event that the agency’s workers’ compensation coverage does not cover the entirety of losses.

The challenge lies in obtaining affordable workers’ compensation coverage with extensive coverage. When in doubt, obtain the information edge.

Meet with a workers’ compensation expert who understands insurance company underwriting requirements.

A little bit of research and communication at the outset of the process paves a path toward an affordable workers’ compensation insurance rate that safeguards hardworking temp employees as well as the bottom line.

Understanding Workers’ Compensation Insurance

The purpose of workers’ compensation insurance is to offset the oftentimes egregious financial burden of medical bills, lost wages, and body site loss of use after an injury or illness occurs when working.

The bottom line is medical care has become absurdly expensive in the 2020s in the United States, prompting businesses of all types and sizes to secure workers’ compensation insurance that prevents litigation.

Businesses that fail to obtain such coverage run the risk of an injured or ill employee suing them for medical bills and lost wages resulting from a workplace injury or illness.

Workers’ compensation insurance covers the following:
  • Cost of medical care
  • Prescription medication to treat the injury or illness
  • Durable medical equipment
  • Lost wages
  • Body site loss of use for injuries and illnesses causally related to workplace activities

The operative word in the preceding sentence is causally.

If it is proven that the alleged injury or illness is not causally related to the employee’s work, his or her workers’ compensation claim might not be approved.

If a body part is permanently injured, a workers’ compensation claims examiner or workers’ compensation board member will request that an independent medical exam be conducted.

Often referred to by the acronym IME, this exam determines if the injury or illness in question is causally related to the employee’s work duties and the loss of use of the body part in question.

A body site's scheduled loss of use is quantified as a percentage.

As an example, an injury that occurs on a construction scaffold that damage’s one’s leg might result in a 25%, 50%, 75% or 100% loss of use of that body site, setting the stage for ensuing financial indemnity payments to compensate for lost wages and diminished earning capacity.

Depending on state rules, financial indemnity payments are typically a percentage of the employee’s regular earnings.

Alternatively, if the IME determines the injury or illness is not causally related to workplace activities, the request for workers’ compensation will be denied.

Workers’ Compensation in Temp Staffing

Temporary staffing agencies serve as the “middle man” between the hiring business and job-seekers.

Part of the hiring business owner or manager’s logic in using a temporary staffing agency to handle human resources duties is the fact that this intermediary reduces legal and financial liability by securing workers’ compensation insurance.

Temp agencies are also helpful in pinpointing employees who are willing to work on a temporary basis.

Moreover, temp staffing agencies excel at reconnecting job-seekers with new temporary or possibly permanent gigs, ensuring the previous company that needed temporary help is no longer on the hook for unemployment financial compensation after employment ends.

The cost of workers' compensation coverage for your staffing agency will not be exactly the same as the cost for another temp staffing agency or a direct employer.

Examples of variables that play a part in determining the cost of workers' compensation coverage include but are not limited to the following:

  • Amount of coverage
  • Claims history at the business
  • Claim prevention safety practices
  • Specific roles of employees' annual employee financial compensation
  • Location(s) of the business
  • Aggregate number of employees
  • Desired coverage limits
  • Desired deductible amount
  • Number of years in operation
  • Type of business
  • Type of work performed

The more comprehensive a temp staffing agency’s workers’ compensation coverage is, the greater the chances are of landing new clients in need of temporary help and also new employees willing to take a risk in return for a fair wage.

However, the downside to such expansive coverage is it almost always carries a higher premium.

A higher workers’ compensation premium ultimately reduces the wage paid to temp workers yet those hardworking employees benefit in that their potential workplace duties are covered by a fair workers’ compensation policy.

Navigating Workers’ Compensation in the Southeast

Workers’ compensation insurance requirements for temp staffing agencies differ by region and state.

The focus of this content is workers’ compensation coverage for temp staffing agencies in the southeast.

Though southeastern states have different rules regarding workers’ compensation, most such differences are fairly minor.

Regardless of which southeastern state a company is located in, it is imperative that it adheres to the letter of the state’s workers’ compensation laws to remain compliant and also to remain in business without the threat of a significant financial penalty or other punishment.

The penalties for lacking workers’ compensation insurance differ from one state to the next. When in doubt, lean on an employment attorney for guidance pertaining to the rules, requirements, and potential penalties for failure to comply in your specific state.

Additional information is also available through your state’s agency or workers’ compensation board, department, or commission.

However, in general, the failure to obtain sufficient workers’ compensation coverage is likely to trigger a fine, the amount of which hinges on the number of employees, the length of time without sufficient coverage, and the reason for lacking sufficient coverage.

The failure to obtain workers’ compensation coverage also has the potential to lead to costly litigation and possibly even criminal charges.

The entire purpose of having workers’ compensation laws on the books and requiring temp staffing agencies to obtain coverage is to prevent such lawsuits.

When researching each state’s unique workers’ compensation rules, you’ll find certain states do not require employees of a specific type to have coverage.

As an example, several states do not mandate that agricultural employees obtain workers' compensation coverage.

The subtle details of each state’s workers’ compensation laws are detailed within statutes that often vary quite significantly between states.

Business owners and managers often question whether a new enterprise, one that is on the cusp of growth or one that is intentionally small in size still requires workers' compensation coverage.

Indeed, coverage is necessary throughout the southeast.

As an example, the minimum number of employees that triggers the need for workers' compensation insurance in Tennessee is five.

The employee minimums that trigger workers' compensation coverage is merely three in North Carolina, Georgia, and Arkansas.

Employing merely one person in Louisiana and Kentucky prompts the need for such coverage.

However, not all employees are covered throughout the entirety of the southeast.

As an example, product demonstrators, licensed real estate brokers, farm laborers, and domestic servants are not covered by Alabama's workers' compensation laws.

Agricultural farm laborers, state employees, and casual employees are not covered in Arkansas.

Take a close look at Florida's workers' compensation laws and you'll find certain sports officials, for-hire drivers (cab drivers, limo drivers), music/theatrical performers, and independent contractors are not covered.

Sales professionals, farm laborers, domestic servants, and those who work for railroad common carriers are not covered in Georgia.

Musicians including performers who are under contract and employees of private unincorporated farms as well as those who work in private homes are not covered in Louisiana.

If you are uncertain as to whether certain employees are required to be covered, err on the side of conservatism and assume coverage is necessary.

When in doubt, consult with a workers’ compensation insurance provider, workers’ compensation attorney, or workers’ compensation state authority for additional information.

The availability of workers' compensation coverage also differs by state.

As an example, in Georgia, such coverage is available through private insurance providers or the NCCI, short for the National Council on Compensation Insurance.

This council provides coverage through an assigned risk pool.

Georgia workers' compensation coverage is applicable to repetitive stress injuries that occur after ergonomic strain.

As an example, an office worker who develops tendonitis after repetitive work at a keyboard and computer will qualify for workers' compensation including ongoing care such as physical therapy, lost wages, and disability.

Georgia allows injured or ill workers to receive workers' compensation for a maximum of 400 weeks.

In Louisiana, the largest workers' compensation provider is the state's Workers’ Compensation Corporation, a private and nonprofit insurance provider that the state set up to facilitate economic activity.

However, Louisiana employers are also empowered to purchase coverage on the private market or combine with others for group self-insurance.

Louisiana workers' compensation coverage is applicable to full-time, part-time, minor, and seasonal employees.

Alabama temp staffing agencies and businesses are empowered to obtain workers' compensation coverage via commercial insurance providers or self-insurance funds available to groups.

Alabama's workers' compensation law protects employers through remedy provisions.

Alternatively, businesses located in Florida are required to obtain workers' compensation insurance from an insurance provider though there is also the option of applying for approval from the state for self-insurance.

Florida workers' compensation insurance offsets the cost of everything from medical expenses causally related to the accident to lost wages, legal fees, and funeral costs.

Florida has exempted corporations that are not a part of the construction industry and limited liability companies that do not operate in the construction space from workers’ compensation insurance requirements.

Contact Us To Obtain Workers’ Compensation Insurance

If you are an insurance agent, temp staffing agency owner/manager, or own or manage another business, you need the industry’s best workers’ compensation insurance.

Adequate coverage at an affordable rate is essential for the competitive edge necessary for success across posterity.

Though workers’ compensation isn’t free, it provides significant long-term value.

What matters most is that you partner with a provider willing to understand your industry including its unique risks.

Reach out to us today to find out more about workers’ compensation coverage options and we’ll find the best option for your needs.

Download Temp Staffing Program Overview

The AIA Team

Author The AIA Team

More posts by The AIA Team