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 licensed workers’ compensation 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

Discover Pay-by-Pay

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

4 out of 5

clients spend less time on their year-end audit now that they are using ADP’s Pay-by-Pay solution.

4 out of 5

clients agree their annual audit has been easier to manage since using ADP’s Pay-by-Pay solution.

96%

of clients prefer having their workers’ compensation premium payments spread across their payroll cycle (vs. having an upfront deposit).

9 out of 10

clients say they now spend less time managing their workers’ compensation policy and premium by using ADP’s Pay-by-Pay solution.

9 out of 10

clients agree that Pay-by-Pay has helped improve cash flow for their business by spreading premium payments across their payroll cycle.

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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See what others say about working with ADPIA

Meet Our Clients

The ADPIA Licensed Agent was very helpful with our workers’ compensation policy. She was quick to respond, knowledgeable about our policy coverages and offered additional insight. She provided documents immediately and ensured all my questions were answered. I wish all my ancillary business interactions were as quick, concise and productive.

Trevis Jensen Partner, Linked Accounting, LLC

Meet Our Clients

My ADPIA Licensed Agent reached out to help me find the best fit for my workers’ compensation needs… I've been able to save a considerable amount of money while providing my workforce with the best possible coverage. I would absolutely recommend ADP and ADPIA to my fellow entrepreneurs for any of their HR and workers’ compensation needs.

William Sablan President & CEO, Veteran Logistics, LLC

Meet Our Clients

We have worked with ADPIA for years and absolutely love it… We receive and review certificates immediately while on the phone with the representative to ensure they look correct, which truly is helpful and eliminates having to call back multiple times making it a lengthy process. Thank you, ADP, for all you do!

Kenia Escobedo Assistant Director, J.E. Elite Cleaning, LLC

Meet Our Clients

My ADPIA Licensed Agent is quick to respond to our requests and stays on top of any issues that may arise and has taken really good care of our account. If something doesn't look right to her, she will reach out and confirm it. She looks for ways for us to get our value and shops for carriers that will provide us with good service at a fair cost.

Mike Myher Director of Administration, DisplayMax, Inc.

Meet Our Clients

You guys are amazing. The ADPIA customer service is awesome. Hard to find these days. 24/7 service. Thanks for everything you do.

Candace Shoemaker Office Manager, 323 Metal Works Inc.

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Get workers’ compensation 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.

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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Workers’ compensation FAQs^*

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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

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.

A workers' compensation claim can have a significant impact on a small business, primarily through increased insurance premiums. Insurers assess a business's claims history, payroll figures and industry averages to determine premium rates. When a small business files a claim, it can lead to higher costs, sometimes equal to or even exceeding the amount paid in claims. This situation can be particularly challenging for small businesses, which typically have fewer financial resources to absorb the increases compared to larger companies.

Laws and regulations regarding workers’ compensation vary by state and circumstances. Employers should consult a licensed insurance agent to understand specific coverage requirements.

Generally, workers' compensation insurance requirements apply to businesses that have employees. If you are a sole proprietor without employees, you are not typically required to carry workers' compensation insurance. That said, sole proprietors should consider obtaining coverage, especially if they operate in a high-risk industry. Many personal health insurance policies do not cover work-related injuries, leaving sole proprietors vulnerable to significant medical expenses in the event of an accident or injury while working.

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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.

Workers’ compensation insurance for small businesses

Key facts about workers' compensation

Why you need workers’ compensation insurance

Who needs workers’ compensation insurance