Creating a safe work environment is a fundamental responsibility for every employer, though sometimes work-related incidents are unavoidable. That said, over 30% of small businesses operate without workers’ compensation protection. Since having this type of insurance is a requirement in almost every state, this gap represents more than just a potential compliance issue — it’s an opportunity for accounting professionals to demonstrate their value as comprehensive business advisors.
The numbers tell a story: workplace injuries annually affect millions of American workers, resulting in billions in compensation claims. In 2021 alone, businesses faced $60 billion in workers’ compensation costs, while 2022 saw over two million employees miss work due to job-related injuries. These statistics underscore why most states require businesses with even just one employee on the payroll to carry workers’ compensation insurance. But where does this all fit within the businesses your accounting firm assists?
In this overview, we’ll cover what this coverage provides, why it matters to your clients, and why it’s worth bringing up in your conversations with them.
The strategic value of workers’ comp conversations
Positioning your firm as a trusted advisor
Many small business owners view the accountants they work with among their most trusted advisors and often seek guidance beyond bookkeeping. By addressing workers’ compensation requirements, you’re demonstrating awareness of the broader challenges your clients face, while potentially creating additional revenue opportunities through expanded consulting services.
Understanding the landscape
Workers’ compensation rules vary by state, with employee count thresholds differing across jurisdictions. Nearly every state mandates this coverage. Texas and South Dakota are notable exceptions — though it’s still highly recommended employers consider carrying coverage in these two states. If rules are ignored for an extended period of time, noncompliance can have some undesirable outcomes, from modest fines to jail time.
Next, let’s cover what type of protection a policy delivers to business owners.
What policies protect
In a nutshell, workers’ compensation insurance addresses injuries and occupational illnesses that arise from employment (AOE) or occur during the course of employment (COE). Coverage extends beyond obvious workplace accidents to include:
- Chronic conditions from repetitive tasks
- Occupational diseases linked to work environments
- Degenerative injuries from prolonged physical demands
The insurance typically covers medical expenses, rehabilitation costs, lost wages, retraining programs, and disability benefits. In tragic cases, it also provides survivor benefits and funeral expenses.
What clients gain
Financial protection and risk management: Even if an employer has insurance, the policy might not cover the full extent of damages that result from an injury or illness. For example, workers’ compensation insurance doesn’t protect a business from lawsuits brought by an employee harmed on the job. That said, having the recommended amount of coverage may limit legal liability. It may cover the costs of medical bills or lost wages that workers might seek to recover through legal action.
Compliance: State penalties for noncompliance are usually more than just a slap on the wrist, with fines reaching $10,000 or more. Some jurisdictions even impose criminal penalties for willful violations, making compliance discussions particularly valuable.
Peace of mind leads to productivity: Workers who feel protected and valued tend to be more productive and loyal. Comprehensive coverage demonstrates genuine commitment to employee welfare, contributing to positive workplace culture.
Moving on, let’s touch on where your clients might be in terms of a coverage conversation.
Scenarios where your guidance matters most
The unaware business owner: Some small business owners are simply unaware that carrying workers’ compensation insurance is required. Others may not be up to speed on specific state requirements or regulatory changes that affect their obligations.
The cash-flow conscious client: Traditional workers’ compensation policies often require substantial upfront deposits, creating cash flow challenges for growing businesses. Pay-as-you-go options calculate premiums based on actual payroll data, eliminating large upfront payments while ensuring appropriate coverage.
The multi-state operator: Clients with operations across state lines face complex compliance requirements. States such as North Dakota, Ohio, Washington, and Wyoming require coverage through state-operated programs, adding another layer of complexity.
Expanding your service portfolio
Workers’ compensation discussions naturally lead to broader benefits administration conversations. Some accounting professionals identify benefits management as a growth area. Workers’ comp guidance can serve as an entry point for managing 401(k) plans, health insurance, commuter benefits, and other employee perks. Most established payroll service providers have relationships with insurance carriers and can help with coverage research and rate comparisons.
Moving your practice forward
Bringing up workers’ compensation can be a win-win for your practice and the businesses you work with. Not only does it keep clients compliant with state regulations, but it also demonstrates your commitment to their business success (and can even create opportunities to expand your firm’s service offerings). This approach transforms routine client interactions into strategic business discussions by cementing your role as an indispensable advisor rather than just a tax preparer.
For accounting practices seeking to nurture client relationships and identify new revenue streams, workers’ compensation guidance could be a natural extension of your advisory role and helps keep your practice putting the best foot forward.
