I know, I know, a lot of nonprofits don’t have workers comp.
Say you don’t have any employees, only 1099 contractors. Or, everything is run by volunteers. Or, the board is the only people involved. Most people would assume that you don’t need worker’s comp is not needed in any of those situations.
BUT in all those cases, you might need to start thinking about Workers’ Comp. Surprised? I was too, until I had a chance to sit down with Tom Wertish from Novallus Insurance.
Read on to learn more!
What is Workers’ Comp Insurance?
Workers’ compensation insurance gives coverage for a worker’s injury, illness or death on the job. It helps pay for your workers’ medical expenses and lost wages. If you have any workers at all (which I’m guessing you do – don’t stop here, even if you’re tempted to!), you never know when something might happen, and you need this insurance.
Who is considered a “worker?”
One big misconception that Tom and I talked about is that the only “workers” that qualify are full-on employees. That’s NOT true. You should really have a Workers’ Comp policy to cover employees OR 1099 contractors or, technically, volunteers and board members. The people that are carrying out the main business of the nonprofit, the activities that pertain to the mission, need to be covered in the event of injury, illness or death.
In a for-profit business, there’s no obligation to cover the owner of the business with workers’ comp. BUT, think back to nonprofit 101 for a second – there is no “owner” of a nonprofit. Technically, a nonprofit organization is “owned” by the communities it benefits, not by any one person or even the whole board.
In a newer nonprofit where the board members themselves are rolling up their sleeves and carrying out the mission of the nonprofit themselves, they are the workers, not the “owners.” So, they should be covered under workers’ comp, even though there are no wages to restore.
How much does Workers’ Comp cost?
The Workers’ Comp policy price is usually based on the size of your payroll, which makes sense, right? Your policy helps to pay lost wages for workers injured on the job.
So, you’ll pay in an estimated amount based on what you think your payroll will be for a given year, and that amount will be adjusted accordingly at the end of the year when you have the actual amount in your payroll.
What if we don’t have a Workers’ Comp policy?
It could get expensive for you. In Minnesota, where Tom and I both work, there’s something called the Special Compensation Fund that will cover the medical expenses and wages of the worker for the nonprofit in the event that something happens.
BUT, it is by NO means a get-out-of-jail-free card. The SCF will then go after the nonprofit for restitution. So, one way or another, you’re paying. Better to pay a little up front for a policy and be safe, no?
So, now what?
In short, GO GET A WORKERS’ COMP POLICY.
Just recently I saw the ugliness that can come about if a nonprofit doesn’t have a good worker’s comp policy. Trust me, you’d rather avoid the very expensive headache!
If you need some advice, Tom is an awesome broker that I highly recommend (learn more about working with him here).