The corporate world wants to hire the most qualified workforce and keep those employees productive and loyal. But the secret to keeping quality employees requires providing the right compensation and benefits package. This “package” includes incentives, (special perks or regards for good work), compensation (money), and benefits (valuable options such as paid vacation and health insurance). 

Because most employees are unique, larger brands offer a wide range of mix-and-match options to suit individuals needs and preferences. As a CEO, you may have the option of offering your staff incentives based on particular areas of interest and needs and based on their type of work.

How is Compensation Determined for an Employee? 

Compensation is known as the total amount of financial and non-financial pay provided to workers by employers in return for work performed as required. In essence, it’s a combination of the value of your pay, health insurance, bonuses, and any other perk you may receive, such as free lunches, parking, and free events. Such factors are encompassed when you define compensation. Businesses base compensation on multiple factors. Some businesses pay more attention to some form of analysis while others compensate employees for encouraging high motivation, positive morale, and low turnover.


  • Employee’s compensation programs are administered by states.


CEOs pay into state employee’s compensation funds or self-insurance. Then these benefits are distributed to employees who become injured or ill while on the job.

The government manages separate employee’s compensation programs for specific groups, including longshore employees, federal employees, and coal miners. However, employees do not contribute to worker’s compensation premiums.

Tip: Every state has its own employee’s compensation program, but each as different and distinct regulations. For more details, you can check with your state’s agency of labour or a similar department for details.


  • Compensation is Required for All Employers


This statement is largely true, but the type and level of coverage vary from each state to another, and one state doesn’t expect this insurance type.

Coverage is essential for workers as defined by the state, and “all individuals hired or appointed by private employers for compensation,” including independent contractors. Some non-workers receive immunity for employees’ compensation coverage. However, this highly depends on the location, and as you probably know, states differ in:

  • Types of injuries covered and proof
  • Who are covered employees
  • Statutes of limitations (the time in which an employee has to file a claim)
  • Business owner defence against claims, including injuries with alcohol/drugs, self-inflicted injuries, and willful misconduct.

Note: Some states do not require employers to have employee’s compensation coverage. Yet they predict that “going bare” may leave the CEOs open to employees’ personal injury claims.

On the other hand, employees looking to claim compensation for injuries should seek legal advice from an experienced solicitor because there are time limits.  


  • Some States Allow Employers to Self-Insure Worker’s Compensation Coverage


Each country that allows employers to self-insure for staff compensation has particular requirements to qualify for self-insurance. For instance, states like Colorado allows self-funding through pool or groups or for individuals businesses.

Some states permit certain individuals like independent contractors, to be excused from employee’s compensation laws. For instance, Florida allows members ( owners ) of an LCCC or officers of a corporation to file an application to dismiss themselves from the states’ employees compensation laws. These applications are only available for sole managers who work for an employer who has employee’ compensation insurance.  


  • Employee’s compensation covers as Incidents and long-term Illnesses


Employees’ compensation benefit payments support workers by replacing their medical bills, wages, and providing vocational recovery programs so they can go back to the job. Such benefits paid for work-related/accidents and on-the-job injuries:

  • Disability benefits to replace part of the worker’s pay while disabled
  • Medical coverage, including drug rehabilitation coverage
  • Psychological counselling
  • Death benefits for the employees’ dependents and spouse.

 Some on-the-job injuries can occur on a long-term basis or over time; repetitive stress injuries such as the carpal tunnel. Illnesses triggered by exposure to a workplace situation, like black lung, are also common job-related and may be covered by the employee’ compensation.


  • Compensation Premiums are based on the individual employer’s past experience and state rates. 


Employee compensation can also vary by employer classification and by state. Every two years, the Premium Rate Ranking Survey issues a survey that compares employee’s compensation by employer classification and state. 

The cost of employee’s compensation benefits to the employer is based on the severity of illnesses and injuries that type of worker experienced and the gross payroll. For instance, a trucking business would have a much higher ranking than a clerical office.

  1. Employees may be able to sue you at-the-job injuries. 

Not all employee’s compensation payment also workers to lawsuit against their employers, but there are some circumstances in which the worker can sue an employer for workplace injuries or illness for various reasons, including:

  • If the injury exceeded the scope of the employee’s job assignment.
  • If the injury was intentional on the part of the employer


  • Some on-the-job injuries are outside the scope of employee’ compensation. 


What’s more, some workplace injuries are outside the employee’s compensation scope, and the illness or injury is not compensated by it. 

  • If the injury occurred during the performance of a crime,
  • If the injury is self-inflicted 
  • If the worker violated business policy, or 
  • If the worker was not on the job when the event happened. 

In that case, payment for suffering, pain and negligence claims are not included in employee’s compensation. However, suppose you file a worker’s compensation claim. In that case, you won’t be discriminated against since both the state whistle-blower and federal laws prohibit employers from firing or retaining their workers. In contrast, fraud against employee compensation can lead to penalties and high fines.

Employers, on the other hand, must keep file reports, record and give information to workers. In general, business owners must:

  • Keep a record of occupational disease and lost-time injuries
  • Display and share a notice to workers at specific places
  • Inform about lost-time injuries and other accidents.