Industry Case Study

Employer’s Liability & Worker’s Compensation Insurance: Texas

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Companies in Texas have a way of compensating liability insurance and temporary workers working overtime.

Insights

  • Texas has a franchise tax where most state businesses are taxed at the rate of 1%. Wholesale and retail businesses pay a franchise tax of 0.5%. Businesses with annual revenue of less than $10 million pay a 0.575% franchise tax if they file an E-Z Computation form.
  • In Texas, a bodily injury liability per person starts at $30,000, while bodily injury per liability starts at $60,000 per accident and property damage liability starts at $25,000. All business-owned vehicles in Texas are mandated to take commercial auto insurance. Personal vehicles driven for work purposes must be covered under hired and non-owned auto insurance since personal auto policies do not include business use. Thus, it can be included in general liability insurance or the business owner’s policy.
  • In Texas, a flat rate is not an overtime premium, reasoning that applies where employees have compensated a flat rate for a special job carried out during overtime hours regardless of the time consumed in labor. “This situation should be distinguished from “show-up,” and “call-back” pay situations discussed in §§778.220 through 778.222 and from payment at a rate not less than one and one-half times the applicable rate to pieceworkers for work performed during overtime hours, as discussed in §§778.415 through 778.421.” The total compensation must be included regularly and should not be credited toward statutory overtime compensation due.
  • In Texas, liability insurance is meant to protect against claims of loss or damage for which an insured party might be required to compensate for another party. Liability insurance differs from others, such as homeowner’s insurance, auto insurance, renter’s insurance, or business insurance. Therefore, liability insurance covers losses caused by acts or omissions that are legally deemed negligent, resulting in damage to the person or interests of others.

Temporary Worker Compensation

  • The total amount paid must be included regularly; no part of the amount may be credited toward statutory overtime compensation due. Thus, an employment agreement has a $5 per hour payment for work during the hours agreed in good faith as the basic workday hours. Outside the basic hours in a workday or a workweek, a compensation of $7.50 per hour is mandatory. Employees carrying out a special task outside the agreed workday or workweek may receive 6 hours of pay rated at $7.50 per hour, totaling $45, regardless of the time actually consumed in labor. The applicable maximum hours in a standard workweek is 40 hours.
  • Texas does not have an independent overtime law for business employees. Those not covered by FLSA are categorized as exempt or salaried employees, seasonal or temporary workers. Exempt employees, whether salaried or temporary, are not entitled to overtime compensation. They can only be compensated for 40 hours of basic work time. Some jobs are also automatically considered exempt by definition. These jobs include; taxi driving, certain airline employees, delivery drivers paid per approved trips, and farm workers.
  • Thresholds for coverage under employment-related laws, therefore, do not cover all employees. However, different laws apply to different companies or organizations, as coverage involves imposing important duties for employers to meet or satisfy.

Worker’s Compensation Insurance

Worker’s compensation is a system that covers an employee’s lost wages and medical expenses when they occur at work. Although Texas is the only state in the US where employers are not mandated to carry workers’ compensation insurance, understanding this system’s benefits is crucial. It protects both the employer and the employee should they choose to sue the employer for damages.

Employers and Industries Required to Have Workers’ Compensation

  • Although workers’ compensation in Texas is optional, some industries and employers must provide workers’ compensation to their employees.

The state’s requirements for coverage include:

How Companies in Texas Pay for Workers’ Compensation Insurance

1. Buying Insurance

Average Workers’ Compensation Costs for Each State

2. Self-insurance

  • Large private employers may choose to self-insure their workers’ compensation claims. After meeting all financial requirements and getting approval from Division of Workers’ Compensation (DWC), employers can self-insure and pay the cost of their claims by themselves.

3. Self-insurance Group

  • Employers can join other members in a similar or same business to provide their workers’ compensation claims. The group must meet various requirements and get approval from Texas Department of Insurance(TDI).
  • There are three aspects to workers’ compensation that employers must consider before choosing their workers’ compensation program, which are medical, income, and death/burial.

4. Medical Benefits

  • Employees under workers’ compensation in Texas are covered to receive necessary and reasonable treatment for any work-related illness or injury.
  • To receive these medical befits, the injury or illness must be treated by ‘a provider on the state’s approved list, or the treatment must be approved by a listed physician.’
  • An employee could be eligible for lifetime medical benefits for serious illnesses or injuries that occur while working. These benefits would bar the insurance company from settling for a certain time of treatment or amount of money.
  • Employees under workers’ compensation insurance cannot be billed for treatment of work-related illness or injury. They can only receive an information-only copy of the bill from the doctor.

5. Income Benefits

  • In Texas, a formula is used to calculate ‘weekly workers’ compensation benefits based on the injured employee’s earnings before the injury.’ These benefits can be up to 70% of the employee’s average weekly wages before the injury. In 2019, the maximum temporary income benefits were $938. Therefore, ‘impairment income benefits and supplemental income benefits max out at $656 per week with a minimum of $141 per week for temporary income benefits and no minimum requirement for supplemental income benefits.’
  • This table shows the state average weekly wage (SAWW) / maximum and minimum weekly benefits. This indicates that the workers’ compensation insurance varies by an employee’s SAWW as opposed to the position that a temporary employee was staffed in.
  • When an employee works overtime, there will be a direct impact on the amount the employer pays in worker’s compensation insurance. According to Texas Mutual, ‘regular overtime pay (time and one-half) is calculated at 66.6%. For example, $100 of regular overtime is reported as $67.00 of gross payroll. Double-time pay is calculated at 50%, so $100 of double-time pay is reported as $50.00 of gross payroll.’

6. Burial/Death Benefits

GLENN TREVOR
Glenn is the Lead Operations Research Analyst at Simple Manifestation with experience in research, statistical data analysis and interview techniques. A holder of degree in Economics. A true specialist in quantitative and qualitative research.

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