Workers' Compensation Basics: What Every Employer Should Know
Workers' comp is required in nearly every state from your first hire — and getting your class codes and e-mod right can mean the difference between winning and losing bids.
Workers' compensation covers your employees when they're injured or become ill because of their job: medical treatment, partial lost wages, rehabilitation, and disability benefits. In exchange, it's the 'exclusive remedy' — employees who accept comp benefits generally can't sue you over the injury. That trade protects both sides.
It's required — and penalties are severe
Nearly every state requires workers' comp once you hire your first employee (thresholds vary), and going without it can mean fines, stop-work orders, personal liability for injury costs, and in some states criminal charges. This isn't optional coverage to skip while you're small.
How premiums work — and where money leaks
Your premium is payroll times a rate per $100, set by job classification code, adjusted by your experience modifier (e-mod). A clerical employee misclassified as field labor can multiply your cost — auditing class codes is the first thing we do for every workers' comp client.
What to do when an employee is injured
Get them medical care immediately, then report the claim promptly — late reporting is the single biggest driver of claim-cost inflation. A simple injury-response procedure and light-duty return-to-work options keep claims small and your e-mod low.
Frequently asked questions
Do I need workers' comp with only one or two employees?
In most states, yes — many require it from the first employee, and several construction trades require it even for sole proprietors. We'll confirm your state's exact threshold.
How are workers' comp premiums calculated?
Premium equals payroll divided by $100, multiplied by a rate set by job classification code, multiplied by your experience modifier. Correct class codes, accurate payroll estimates, and a clean claims history are the three levers that reduce cost.