Workers’ compensation insurance for small businesses

Workers’ compensation (or workers’ comp or workman’s comp) protects your team and your bottom line. Contact us today for pricing and guidance from Automatic Data Processing Insurance Agency, Inc. (ADPIA®)1, an affiliate of ADP.

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Key facts about workers' compensation

Why you need workers’ compensation insurance

The answer is simple:

  • It's the law: Nearly all states require workers' compensation insurance, depending on the size of your business.
  • There are strict consequences: Non-compliant companies face hefty penalties and stop-work orders.
  • No-fault protection: Most employees are eligible for workers' compensation, even if their injuries resulted from their own negligence.
  • On-the-job coverage: Workers' compensation is unique and essential – health insurance generally won't cover job-related injuries or illnesses.

Who needs workers’ compensation insurance

Most states, with a few exceptions, require businesses to carry workers’ compensation coverage for their employees – even if you’re a small business. Workers’ compensation is especially important in the following industries:

  • Healthcare
  • Manufacturing
  • Restaurants
  • Retailers
  • Contractors

How workers’ compensation insurance works

Workers' compensation insurance provides essential support for employees facing job-related injuries or illnesses, ensuring a smoother recovery and return to work. It generally covers:

  • Medical treatment and care
  • A substantial part of lost wages during recovery
  • Disability benefits
  • Funeral expenses in case of a work-related death
  • Legal costs from work-related injury or illness lawsuits

This insurance doesn't cover incidents outside work, intentional injuries, or those due to substance abuse or intoxication outside work hours. It’s a safety net for your employees and a financial shield for your business.

How workers’ compensation claims work

To ensure swift access to care and sufficient documentation for a claim, employees must immediately seek medical attention after a job-related injury. Once the appropriate paperwork is completed, employers must submit the claim, including supporting documents. After the claim is filed and approved, compensation is promptly paid to employees, allowing them to focus on recovery. They can return to work at their own pace, ensuring a smooth transition back into their roles with minimal disruption.

If you have workers’ compensation through ADPIA, our licensed agents can work together with you to help you submit your claim to your carrier.

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Guidance from seasoned insurance professionals

Working with ADPIA’s licensed agents, you'll receive knowledgeable and supportive guidance — from getting you coverage and price options to alerting you to requirements and regulatory changes.

With more than 200,000 businesses trusting us with their insurance needs, you can make smart choices with confidence, knowing we have the knowledge, tools and resources to help meet your unique needs.

Improve cash flow and streamline payments with Pay-by-Pay®

What would you do if you had better cash flow to invest in your business?

With ADPIA as your workers’ compensation agent and ADP’s payroll and Pay-by-Pay Premium Payment Program2, you get a simple, efficient way to pay your premium.

  • No upfront premium deposit is required3, freeing up funds that you can invest in your business
  • Premium payments are based on actual, not estimated, payroll data and carrier rates to minimize over or underpayments at your year-end audit4
  • Payments are spread over your company's payroll cycle, so you know what to expect and when

Compare ADP's Pay-by-Pay to traditional premium payment programs

Pay-by-Pay Premium Payment Program

  • No premium deposit required
  • Premium based on actual payroll and carrier rates
  • Payments spread out over your company's payroll cycle
  • Reduced risk of over or underpayment at year-end audit
  • Eliminates writing checks and assures accurate, on-time payments

Without Pay-by-Pay

  • A 25-100% premium deposit may be required
  • Premium based on estimated annual payroll
  • Limited payment terms (e.g., monthly, quarterly, semi-annual)
  • Greater risk of additional premium due at year-end audit
  • Need to hand write checks and send via mail, risking late payment or cancellation

See what you can do with Pay-by-Pay

Pay-by-Pay may help you eliminate upfront deposits, improve cash flow by making accurate and automated payments and simplify your audits – directly impacting your bottom line.

Boost cash flow 

Save time and enjoy more accurate premium calculations by integrating your ADPIA policy with ADP payroll.

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Make accurate premium payments

Pay what you owe and keep the rest of your cash where it belongs, invested in your business.

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Access your policy anytime

Access your policy details online, 24 hours a day – 7 days a week.

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Clients agree – we make workers’ compensation easy

Internal survey of 697 ADPIA clients in 2022 that use ADP’s Pay-by-Pay® Premium Payment Program to calculate and process their workers’ compensation premiums.

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Get insurance and payroll all in one 

Streamlining your workers’ compensation and payroll is as easy as partnering with ADPIA. Whether you need competitive proposals from multiple carriers or advice from licensed agents, you can easily handle your insurance online, on your terms. That's because Pay-by-Pay integrates with ADP payroll, which means you can manage your insurance policy directly from your payroll system.

Video: Catch Workers' Compensation Errors Before They Happen

Catch Workers' Compensation Errors Before They Happen

ADPIA's Insurance Inspector tool leverages AI technology to help you catch errors and other compliance risks that could cost you time and money.

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See what others say about working with ADPIA

Workers’ compensation FAQs*

What is the difference between workers’ compensation and health insurance?

The key differences between workers' compensation and health insurance are:

  • Workers' compensation  covers workplace-related injuries and illnesses;
  • Health insurance generally covers medical expenses and preventative care not related to work.

When do I need to buy workers’ compensation insurance?

In most states, workers' compensation insurance is required for companies with one or more employees. States typically enforce penalties for employers who do not have workers' compensation insurance. Contact us for help determining your state's requirements.

Who is covered by workers’ compensation insurance?

Workers' compensation insurance coverage typically includes full-time and part-time employees (W-2 workers), but the specific requirements can vary by state. Independent contractors may also need coverage depending on contractual requirements or state laws. The necessity for coverage can depend on factors like the size of the business, the type of work being performed, and state-specific legislation.

Who is exempt from workers’ compensation insurance?

Each state has specific exemptions for those who don't need to carry workers' compensation insurance. Still, common exemptions include agricultural employees, domestic workers, real estate employees, and coaches for children's teams. ADPIA can work with you to check your state's workers' comp requirements, as they vary widely and may include more specific exemptions or stipulations.

How much does workers’ compensation insurance cost?

Workers' compensation insurance pricing is based on: carrier defined rates, your payroll, the number and job classifications of the employees, classification of your business and past loss experience. As the employer, you are responsible to pay for the cost of workers' compensation premiums.

What does workers’ compensation insurance do?

Workers' compensation insurance generally pays for the rehabilitation, recovery or medical bills of employees' work-related injuries, as well as lost time due to a work-related injury. Workers' compensation insurance is not a substitute for health or medical insurance — employees are only covered for on-the-job injuries.

Does workers’ compensation cover business interruption?

Workers' compensation insurance does not cover business interruption. It is designed specifically to cover employee-related injuries and illnesses that occur due to or in the course of employment. Business interruption insurance is a separate type of policy that provides coverage for lost income and additional expenses when a business is affected by a covered event.

My partner and I subcontract work to other contractors but have no employees. Do we need workers’ compensation insurance for ourselves?

The answer to this question is complicated and depends on several factors. Contact us and a licensed APDIA agent will be able to help you.

Does workers’ compensation cover my subcontractors?

Workers' compensation insurance generally does not automatically cover subcontractors, though that may vary based on your state. Employers usually need to take additional steps to ensure coverage for subcontractors, which might involve specifying coverage terms in the contract or purchasing separate policies. Work with ADPIA to understand your specific obligations and options regarding subcontractors and workers' compensation insurance.

How am I billed for workers’ compensation if I’m not using ADP’s Pay-by-Pay?

Direct billing is an option for clients that prefer to receive a bill for their workers' compensation premiums that comes directly from their insurance carrier.

What is an additional insured?

Additional insureds are third-party entities that were not originally named on your workers' compensation policy, and cannot be added. This is because your workers' compensation policy is intended to cover your employees only. However, additional insured endorsements can be included in general liability policies.

What changes do I need to notify ADPIA about?

Please notify ADPIA about any modifications made to your business operations, including (but not limited to) changes to:

  • Your authorized contacts
  • Operating locations
  • FEIN
  • Entity and ownership status
  • Employee status

Why am I having an audit, and how can I prepare?

All workers' compensation policies are subject to audit by the carrier as per the terms of your policy. You may be required to participate in an end-of-policy term audit to confirm the accuracy of your premiums and coverage. If so, your carrier will contact you within 30-60 days of your policy expiration to arrange the audit. Rest assured that ADPIA is here to help you through the audit process. Prior to contacting us for assistance, please have the following documents handy:

  • Quarterly reports or 941s
  • Payroll journal/master payroll file
  • Federal tax records
  • State unemployment reports
  • Overtime pay by employee
  • Payments to subcontractors (if a subcontractor provides materials as part of a job, be sure the invoice specifies payment for work and materials separately)
  • Certificates of insurance for each 1099 and/or sub-contractor who maintains their own workers' compensation policy
  • CA clients with dual wage classifications: You may be required to provide timecards

Who handles my audit?

The audit must be completed by an authorized representative of your business. ADPIA can help by providing copies of reports and answering questions related to the audit process, but ADPIA does not perform the audit.

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1 Automatic Data Processing Insurance Agency, Inc. (ADPIA) is an affiliate of ADP, Inc. All insurance products will be offered and sold only through Automatic Data Processing Insurance Agency, Inc., its licensed agents or its licensed insurance partners; 1 ADP Blvd., Roseland, NJ 07068. CA license #0D04044. Licensed in 50 states. Certain services may not be available in all states.

2 State fees and mandatory state assessments may still apply.

3 While premium deposits may be eliminated by most carriers, mandatory state assessment fees may be required in some states.

4 Requires latest version of RUN and/or Workforce Now

* FAQs are general and not intended as tax or legal advice. If you have any questions, contact a tax or legal professional.