Does a Small Employer Need Workers’ Compensation? - Zupnick Associates

(By: Brittany Brooks)

Yes. Small employer workers’ compensation is required in almost every state, so the short answer is yes, you do need workers’ comp. Even if you only employ one person, you’re still mandated to have it, in particular states.

However, it’s not as daunting as it may seem.

There are benefits to having workers’ compensation, even for small business owners. You don’t have to be a big corporation to afford it and it’s easier than you think to get a policy.

Here are some reasons why. 

Advantages of Having Workers’ Compensation

1. Protects Your Employees

We never expect accidents to happen, but unfortunately, they’re still prone to occur. And here’s something to think about, the employee didn’t clock in thinking they were going to get injured on the job either.

It’s a shock for all parties involved.

Workers’ comp helps alleviate some of the burdens associated with a work-related injury, e.g., a portion of their lost wages, medical expenses, and rehabilitation costs. This allows the injured worker to get the medical care they need to recover.

If the unthinkable happens and the employee passes due to a work-related injury or illness, a death benefit may be paid to the surviving family. 

Employees aren’t required to contribute to the policy, so they don’t have to worry about signing up for it. As long as you pay your premium, they’ll be able to access the benefits.

2. Protects You

Workers’ compensation isn’t all about the employee; it also protects your business. The average insurance claim is roughly $40,000 for one employee.

The insurance company shields you from those costs as long as your premium stays current.

Once the injured worker accepts the compensation, they also waive their right to sue. In return, the employee receives guaranteed compensation. The employer agrees to a certain level of liability and won’t have to prepare for a negligence lawsuit in court.

Commonly referred to as a “no-fault” contract.

3. Keeps You Compliant 

As mentioned above, almost every state requires employers to maintain a worker’s compensation policy. The requirement varies from state to state, so check your specific state’s compliance laws.  

For instance, Georgia requires an employer with at least three employees to have a workers’ compensation policy, but New York requires a business with at least one employee.

If you’re in a sole proprietorship, corporation, or partnership, worker’s comp isn’t mandatory until you have paid employees.

Fun Fact: The state of Texas does NOT require their employers to have workers’ compensation insurance.


Which Employees Are Eligible?

All full-time and part-time employees can receive workers’ compensation benefits for work-related injuries and illnesses. However, this does exclude independent contractors and freelancers.

Independent contractors and freelancers are paid as vendors, not as paid employees, making them ineligible.

How Can I Get a Policy?

Getting a workers’ compensation policy varies by state and it’s relatively simple to get started. 

In New York, there are three ways to get coverage:

1. A Private Insurance Company or Broker

You can reach out to an insurance company or broker to find out what’s available to you and what type of coverage is best for your business.

2. The New York State Insurance Fund (NYSIF)

The NYSIF is a separate entity from the New York State Workers’ Compensation Board (WCB) that offers coverage to employers at competitive rates. They are not-for-profit and you can’t be denied for insurance, even if other companies turned you down.

There is one exception: The employer can be denied if they have an overdue balance with the NYSIF. 

3. Apply for Self-Insurance

If approved, the employer agrees to pay all benefit payments and comply with all WCB laws, rules, and regulations.

*A security deposit must be in place in case the company falls into default on benefit payments.

Can A Broker Help With Workers’ Compensation? – The Silver Bullet


How Much Does Workers Comp. Cost Employers? Is Workers Comp. Expensive?

The cost depends on the state your employees work in. A few other factors also determine it:

  • Industry risks
  • Type of work performed by the employees
  • Total of your average payroll
  • And if you have any previous claims

Premium rates for low-risk and high-risk jobs will differ. In New York, low-risk premium rates are approximately $0.07 per $100 of coverage and roughly $29.93 per $100 of insurance for high-risk jobs.

**It’s important to contact your benefits administrator or broker for specific information regarding your state’s laws.


Zupnick & Associates is available to provide professional workers’ compensation advice, policies, and answer any questions you may have. Reach out for an in-depth perspective!

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