According to federal law, all companies must pay for the medical treatment and the lost wages of employees who suffer from work-related injuries or illnesses. To avoid crippling costs under this national requirement, companies buy employee insurance policies.
Most states give companies the option of buying a compensation policy, either directly from the state or from a private insurer. Each state determines the payment schedules of its own system, the requirements to qualify for employees and the rehabilitation procedures.
Although the provisions of the laws of each state differ greatly from each other, the underlying principle is the same: that employers must take the costs of injury, illness and death in the workplace, without taking into account errors, and partially replace the wage loss. While the income replacement under employee compensation is usually a percentage of the actual wage, it is counted as a transfer payment and is therefore not subject to the federal income tax for the employer or employee. Some state laws exempt certain categories of employees from cover.
Each state will allow certain individuals to log out, depending on the legal entity, the size of the organization or the nature of the work.
Overall, the workmen compensation policy is a boon for both employees and employers. It gives employees several benefits which help in keeping up their motivation and reducing attrition. Similarly, employers can also protect themselves from the legal liability that may arise due to the injury of workers.