Workers’ Compensation 101 for Small Businesses

Small and large businesses need to have workers’ compensation with a few exceptions. Workers’ compensation allows you to protect your employees if they’re injured in the workplace or suffer an illness that’s related to workspace exposure.

Workers’ Compensation Briefing

So, what is workers’ compensation anyway? As an employer, there is a reasonable amount of care that you must provide in the workplace. You see, you can’t put your employees at an undue risk.

There is a standard of safety expected in every workplace.

But as we all know, accidents happen. An employee can slip and fall on a screw on the ground, and it could have fallen off of a light in the ceiling. Job-related injuries and illnesses need to be treated properly.

Workers’ compensation covers these incidentals.

Even if the worker is at fault, workers’ compensation will kick in and allow the worker to receive benefits.

“If you are injured at work, you are eligible to file a claim against your employer’s insurer for medical bills, disability benefits and certain other benefits,” states Bogdan Martinovich.

As an employer, this is a good thing.

You see, workers’ compensation ensures that your employees have a limited right to sue you.

Note: States regulate workers’ compensation, so you’ll want to learn and understand your employees’ rights under your state’s regulations.

State Requirements

Do you need to have workers’ compensation insurance? Maybe. It really depends on your state. Since every state is different, it’s impossible to say whether or not you definitely need to carry a workers’ compensation policy.

A few circumstances when you may not be required to carry a policy include:

  • Type of business
  • Type of work conducted
  • Number of employees

You’ll find that there are exemptions for farmworkers, seasonal workers and domestic employees in many cases. If you’re a sole proprietor, you’ll not be required to have a policy in most cases. If you have an employee, even if it’s just one, you may need to have a workers’ compensation policy.

NFIB has a list of all states and their respective laws.

I’m Required to Have a Policy. Where Do I Start?

I recommend calling your insurer, if you have one for any other aspect of your business, and ask if they offer workers’ comp insurance. You see, you may also live in a state where the state provides you with workers’ compensation.

State funds may be a last resort if you can’t find insurance through a traditional insurer.

If you do have a state where private insurance is required, you’ll want to do your research and start calling insurance providers. Again, I recommend choosing an insurer that you can obtain multiple insurance policies through.


You can normally bundle insurance options and save money.

Insurance brokers can also help you find an insurer that will provide you with a list of great insurance companies offering workers’ compensation. Brokers will work to help you find the most affordable policy.

The cost of your policy will depend on:

  • Business type
  • Number of employees

You want to make sure that if your state does require you to have workers’ compensation, you obtain and maintain it. You’re liable for your workers’ potential injuries and illnesses, so if you don’t have workers’ compensation, you will lose all of the liability protections that it offers.

How to Control Your Workers’ Compensation Costs

Entrepreneur has a great resource that also explains how you can control your policy costs. The costs that you have may go up if you have a lot of claims against your policy. A few things to keep in mind when trying to control your costs are:

  • Risk plan. If you’re assigned a risk plan, and most insurers won’t tell you this, you’ll be paying more out of pocket for your insurance. Risk plans mean that you’ll want to try to do everything in your power to get out of the risk plan.
  • Credits. Some states offer credits for certain types of businesses. Your state may offer a small deductible, or they may not offer anything. Find out what your state offers and take advantage of it.
  • Safety. If your workplace is safe, there is less of a risk that an employee will file a claim against you. Take every effort to train employees and make sure that your workplace is safe.

Also, don’t be afraid to shop around and try finding the best workers’ compensation policy in your area.