In Colorado workers’ compensation is the type of insurance coverage that most businesses in the state should be familiar with. In this guide, we’ll cover the basics of what it covers, exceptions that exist, and how businesses can obtain a policy.
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Why is workers’ comp important?
Simply put, workers’ compensation (also known as workman’s compensation) covers medical expenses and provides partial income replacement for Colorado employees who are hurt or get sick while on the job. There are benefits for employers as well. In many instances, a company is shielded from litigation due to work-related injuries or illnesses that take place on the job because of workers’ compensation coverage.
Let’s talk more about who needs to carry coverage and how companies can purchase it.
Colorado workers’ compensation: Which employers need a policy?
By law, all public and private employers in the state of Colorado must provide workers’ compensation coverage if they have one or more full- or part-time employees. Keep in mind that this even applies to workers who are also family members. In Colorado, anyone hired to perform services for pay is presumed to be an employee.
More about Colorado workers’ comp laws
Are there any exceptions in Colorado?
There can be some exemptions for certain workers, according to Colorado’s Department of Labor. Exceptions include a sole proprietor or any general working partner, corporate officer, or member of a limited liability company (LLC), commission-based real estate agents and brokers, independent contractors, providers of residential host-home services or support, railroad employees not covered under federal law, independent contractors, ski volunteers, and drivers under a lease agreement with a common carrier.
Construction industry considerations
Everyone working on a construction site must be covered by workers’ compensation insurance. Do you use contractors on job sites? You must make sure that the contractors also meet workers’ compensation requirements, and if they don’t, there’s potential for fines. Colorado’s Department of Labor provides some guidance on how each worker can receive coverage.
Provide workers’ compensation insurance to your contractors
In this scenario, you can charge the contractors for their portion of the insurance premium. Get proof everyone you have direct contact with is complying with workers’ compensation guidelines. This can come in two forms:
- Proof of workers’ compensation insurance
- Proof of rejection of coverage
Keep in mind
Employers are required to display a Notice to Employer of Injury Poster (WC 50) in the workplace at all times, per Colorado’s Workers’ Compensation Rules of Procedure.
Purchasing workers’ comp in Colorado
To obtain coverage for their business, employers have a couple of options.
Private carrier
All insurance in Colorado is sold by private insurance carriers. There is no state fund in Colorado. An owner can shop around for pricing quotes similar to how they might look around for a homeowners or automobile policy.
Self-insurance
This can be either individual or pooled and there are certain requirements. Individual employers in Colorado must meet the following requirements in order to become self-insured.
- Been in business for at least five years or be a subsidiary of a company that has been in business for at least five years
In addition to the requirements listed above, they would either need to have:
- At least 300 full-time employees working in Colorado
- Parent company with assets of at least $100 million
In addition, the Department of Labor and Employment states that “employers who wish to become self-insured must have an exemplary financial position” provide the following information:
- Excess insurance coverage
- Security such as a surety bond
- Claims adjusting either internally or through use of a third-party administrator
In terms of coverage type, employers have two options to choose from when on the market for workers’ compensation.
Traditional
Premiums for traditional plans are calculated based on an estimate of a company’s annual gross wages. Once the insurer calculates the premium, employers are required to pay an upfront lump sum, sometimes accompanied by monthly or quarterly premiums over the rest of the year. At the end of the year, insurers audit the company’s payroll records to calculate the actual cost of the policy, and any amount owed or due are refunded to or collected from the employer.
Non-traditional
Pay-as-you-go premiums are calculated each payroll, which ensures that businesses are paying exact amounts for their coverage. These plans eliminate the need for upfront lump sum payments and year-end audits. Learn more about pay-as-you-go workers’ comp.
What are the penalties if Colorado employers fail to provide workers’ compensation?
Failure to offer workers’ compensation can have some less-than-desirable outcomes for businesses. Colorado’s Division of Workers’ Compensation can issue a cease and desist order, requiring a business to stop all operations.
Also, businesses can face fines of up to $500 per day for each day they are uninsured. Moreover, if someone gets hurt on the job, you will also have to pay the entire cost of the claim yourself, as well as an additional penalty totaling 25% of the injured worker’s benefits.
What happens when there is an incident?
Employees who experience an on-the-job incident need to notify you in writing within 10 working days, per the Colorado Department of Labor and Employment. Even if it has been more than 10 days, the worker should still notify you in writing as soon as possible. Additionally, the state encourages employees to report incidents directly to the Division of Workers’ Compensation using the Workers’ Claim for Compensation form (WC 15).
More information and resources
Colorado workers’ comp: Helping companies keep compliant
For businesses operating in the state of Colorado, obtaining the proper workers’ compensation insurance can help you stay compliant and protect your employees in the event of a work-related injury or illness. For most employers, their workers are their most valuable resource, so putting their safety first is a no-brainer. Moreover, because insurance coverage protects employers from litigation related to workplace injury and illness, it’s one less thing to worry about. So, if you own a business in Colorado, you can stay ahead of the game by knowing how policies work and how to set one up.
Please note all material in this article is for educational purposes only and does not constitute tax, benefits or legal advice. You should always contact a qualified tax, legal or financial professional, in your area for comprehensive tax or legal advice.
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.