--- title: "Workers' Compensation Insurance for Small Businesses | ADP" description: "Help protect your team and your bottom line. Learn why more than 200,000 businesses trust ADPIA® for workers’ comp insurance and supportive guidance." --- # Workers’ compensation insurance for small businesses Workers’ compensation, also known as workers’ comp or workman’s comp, helps protect your employees and business when work-related injuries or illnesses happen. Automatic Data Processing Insurance Agency, Inc. (ADPIA®)¹, an ADP affiliate, has licensed agents to help you explore coverage options, understand requirements and take advantage of pay-as-you-go premium payments.2 Get Pricing Need help? [Get support](https://insurance.adp.com/contact-us.aspx). ![Warehouse men consulting over a laptop, highlighting the need for workers' compensation insurance as part of safety measures for small businesses](https://marketing-assets.adp.com/api/public/content/e1997c749c864952b9bf3f320ecdf2b5?v=d933e094) ## What is workers’ compensation insurance? Workers’ compensation insurance covers medical costs, lost wages and recovery support for employees injured or sick on the job. It also helps protect employers from workplace injury lawsuits and meet requirements in most states. Why you need it ### Why you need workers’ compensation insurance Workers’ compensation is both a legal requirement and a critical layer of financial protection for your business and employees. - Required in most states, based on business size and structure  - Non-compliance can result in fines, penalties or stop-work orders - Provides no-fault coverage – employees are typically eligible regardless of cause - Covers work-related injuries and illnesses not included in standard health insurance ![Sanitation worker in protective gear depicting employers' need for workers' comp insurance, including illness or injury sustained on the job](https://marketing-assets.adp.com/api/public/content/0d45dc1fc1bf48ed825f68cdb1089138?v=e80bfb76) Who needs it ### Who needs workers’ compensation insurance Most businesses with employees must carry workers’ compensation coverage or risk penalties, with requirements varying by state. - Employers with full-time or part-time employees in most states, including small businesses - All industries, but especially higher-risk ones such as healthcare, manufacturing, restaurants, retail, construction and contractors ![Smiling workers in a kitchen, depicting the workers' comp requirement for various business types, such as high-risk industries like restaurants](https://marketing-assets.adp.com/api/public/content/e5645a7a41a945728b8e8b51c8e51e6d?v=7efc5c64) How it works ### How workers’ compensation insurance works Workers’ comp provides defined benefits to employees while helping limit employer liability. - Covers medical treatment, care and rehabilitation - Provides disability benefits for short- or long-term impacts  - Pays death benefits and funeral expenses for fatal incidents  - May cover legal costs tied to workplace injury claims  - Does not cover non-work incidents or injuries involving misconduct or substance abuse ![Woman working at table, contemplating types of workers' comp insurance coverage including medical treatment, disability benefits and legal fees](https://marketing-assets.adp.com/api/public/content/ac2a83a19cbd46eaa0b92ba575425ab8?v=30736f0f) Filing a claim ### How workers’ compensation claims work The claims process is designed to ensure timely care, proper documentation and benefit payments. - Employee seeks medical care and reports the injury promptly  - Employer submits a claim with supporting documentation - Carrier reviews and approves eligible claims - Approved claims are paid to support recovery and return to work When you have workers’ compensation insurance coverage through ADPIA, licensed agents can work with you to help you submit your claim to your carrier. ![Senior construction worker wearing protective gear with a radio, depicting employees' return to work after filing an insurance claim](https://marketing-assets.adp.com/api/public/content/c6dd21bec41a4402b5a3bf78259a3185?v=2ce8e635) Calculating costs ### How the cost of workers’ compensation insurance is determined Premiums are based on several risk factors tied to your workforce, operations and location. - Total payroll size - Industry and job risk level based on NCCI classification codes  - Claims history and past incidents - State laws, rates and requirements ![Healthcare staff conferring over a tablet, depicting factors considered when calculating workers' compensation insurance for your small business](https://marketing-assets.adp.com/api/public/content/5febf2f2ca3a44508a17d088335c3448?v=79036724) ## Results that matter to your business Businesses like yours report saving time, improving cash flow and making workers’ compensation payments easier to manage. ![Smiling floral shop worker with tablet in hand, depicting satisfied small business owners who use ADP to manage workers' comp insurance](https://marketing-assets.adp.com/api/public/content/dbeec34394054068b64c9dd47c28287e?v=17679871) ### 90%of clients say they spend less time managing their workers’ compensation policy and premium with ADP.5 ### 80%of clients say ADP helps improve cash flow by spreading payments across the payroll cycle.5 ### 96%of clients prefer spreading premium payments over time instead of paying an upfront deposit.5 Pay-by-Pay® premium payments ## Improve cash flow and simplify workers’ comp payments [Pay-by-Pay](/what-we-offer/benefits/business-insurance/workers-compensation/adp-pay-by-pay)®2 connects your workers’ compensation premium directly to ADP payroll, helping you avoid large upfront costs, improve cash flow by spreading payments across payroll cycles3 and reduce manual payment work throughout the policy period. ### Improve cash flow No upfront premium deposit3 means you keep more cash on hand to invest in your business. Payments are spread across your payroll cycle, giving you better visibility into costs and helping you avoid large lump-sum payments. ### Improve cash flow No upfront premium deposit3 means you keep more cash on hand to invest in your business. Payments are spread across your payroll cycle, giving you better visibility into costs and helping you avoid large lump-sum payments. ![Man in hardhat talking on mobile phone, depicting the relief of using Pay-by-Pay to avoid upfront costs associated with typical insurance coverage](https://marketing-assets.adp.com/api/public/content/0ac7253d234840e993805bbc6fa76a18?v=d6d18224) ### Pay based on actual payroll Premiums are calculated using real payroll data and carrier rates, not annual estimates. This helps reduce the risk of overpaying during the year or owing more at audit, so you pay what you owe as you go. ### Pay based on actual payroll Premiums are calculated using real payroll data and carrier rates, not annual estimates. This helps reduce the risk of overpaying during the year or owing more at audit, so you pay what you owe as you go. ![Skilled senior laborer inspects his work, analogous to the accuracy small business owners find when premiums are calculated, not estimated](https://marketing-assets.adp.com/api/public/content/2ea8f0d0c78d4cb2b65a7a1593e636c5?v=fe098c4a) ### Simplify payments Premiums are automatically calculated and paid through your payroll process, with AI-supported tools and other technologies helping reduce manual work and support accurate, on-time payments. You can also access policy details online anytime for added convenience and control. ### Simplify payments Premiums are automatically calculated and paid through your payroll process, with AI-supported tools and other technologies helping reduce manual work and support accurate, on-time payments. You can also access policy details online anytime for added convenience and control. ![Smiling woman in reflective vest looking at mobile phone, exemplifying the simplicity of automatically calculated and paid workers' comp premiums](https://marketing-assets.adp.com/api/public/content/e4bfceb0ab3a420e973c65474b875d33?v=e6f13971) ![Man in hardhat talking on mobile phone, depicting the relief of using Pay-by-Pay to avoid upfront costs associated with typical insurance coverage](https://marketing-assets.adp.com/api/public/content/0ac7253d234840e993805bbc6fa76a18?v=d6d18224) ![Warehouse worker in protective gear inspecting goods, depicting the regulatory requirements that can be simplified when guided by ADP](https://marketing-assets.adp.com/api/public/content/b505cdac462e4a03a2900d1bcbf7a354?v=169b5ebf) ## Guidance from licensed workers’ compensation insurance professionals Working with ADPIA’s licensed agents, you'll receive reliable guidance, from showing you how to get workers’ comp insurance coverage to providing price options through our carrier partners and alerting you to requirements and regulatory changes. With more than 200,000 businesses trusting ADPIA 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. ## What businesses say about working with ADPIA - ![ADP client John Ollis, Owner, AAMCO Transmissions of North Pittsburgh](https://marketing-assets.adp.com/api/public/content/80b9b9fd9dd24f2db3735cb7d8ce916c?v=1add9be8) ### One less thing to manage > “ADP has been extremely helpful navigating me through my first year. With all the challenges I faced, payroll was the least of my worries. If I could give any new or existing AAMCO owner any advice, it would be to team up with ADP. You won’t regret it.” [Read Case Study](/resources/what-others-say/testimonials/e/expert-support-aamco-north-pittsburgh) Name John Ollis Title Owner Company AAMCO Transmissions of North Pittsburgh - ![ADP client Ynacio Ramirez, Owner, Coast Party Rentals](https://marketing-assets.adp.com/api/public/content/a780c58b1d7f4d91a1c19dfbcf8595e8?v=b666d7c3) ### An easier way forward > “California is a tough state to do business, and I’m 98% retired at this point. My sons are taking over the business, and I want to make things as simple for them as possible. With Pay-by-Pay, it’s amazing how much easier it is.” [Read Case Study](/resources/what-others-say/testimonials/y/ynacio-ramirez-coast-party-rentals) Name Ynacio Ramirez Title Owner Company Coast Party Rentals ## Workers’ compensation FAQs\* ### How do I get workers’ compensation insurance? Automatic Data Processing Insurance Agency, Inc. (ADPIA), an ADP affiliate, can help obtain workers' compensation insurance for small and mid-sized businesses. Licensed agents can help you find workers' compensation coverage that meets your state requirements while protecting your company and employees if there is an injury at work. Contact us for help securing a policy with one of our top-rated carrier partners. ### What are the benefits of workers' compensation insurance for employers? Small business workers’ compensation insurance is a strategic investment that helps protect business owners and their employees in the event of a work-related incident. If your insurance is compliant with state law, an employee who receives workers’ comp benefits typically can't sue you for their injuries or lost wages. In exceptional cases where a lawsuit proceeds, a workers’ comp policy with liability coverage can help pay your court costs and legal fees. Lawsuits filed by both employees and third parties adversely affected by an injury to a worker are generally covered. Additional benefits offered by some insurers include fraud prevention support, workplace safety tools and managed care services to help injured workers get back to work faster. You may also gain access to benefits administration tools and a pay-as-you-go program for more accurate premium payments. ### 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. ### How do workers’ comp requirements differ by state? Nearly all states require employers to carry workers’ compensation insurance as soon as they hire an employee, though each jurisdiction is unique. In some states, employers that don’t provide the required coverage face severe penalties, including fines, jail time or both. They may also be responsible for covering their injured employees’ medical bills. Requirements further differ for self-employed workers, single-member LLCs and independent contractors. Unless your state says 1099 contractors aren’t required to have coverage, it’s a good idea to include them in your policy. In states where coverage is optional, small businesses can still get coverage from an insurance company or state-funded account to help protect the organization and its employees. However, in “monopolistic states” (North Dakota, Ohio, Washington and Wyoming), employers must purchase coverage from their state’s workers’ compensation insurance fund. An ADPIA-licensed agent can help you learn more about the laws in your state. ### 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. ### What injuries are typically covered by workers’ compensation insurance? With workers’ compensation insurance, employees are covered if they get hurt or sick on the workplace premises or elsewhere while they are acting in the course and scope of employment. The injury or illness does not have to result from a single incident. For example, work-related repetitive stress injuries are generally covered by workers’ comp. Additionally, workers’ compensation insurance covers injuries employees may sustain due to workplace violence, terrorist attacks and natural disasters that occur while they are working. Accidents driving to and from work are not covered. Also, benefits may not be available for employees who hurt themselves on purpose while on the job or suffer an accident while intoxicated at work. ### What treatment can injured or sick workers receive with workers’ compensation? Workers’ compensation insurance provides workers who are hurt or sickened on the job with all medically necessary and appropriate treatment. However, many states have adopted measures to help control expenditures. They may enforce utilization management guidelines describing which treatment protocols and diagnostic tests are acceptable for specific injuries. ### What benefits do injured or sick workers receive from workers’ compensation? If employees are injured on the job or suffer a work-related illness, workers’ compensation insurance generally covers: - Medical treatment and care, such as emergency room visits, necessary surgeries, prescriptions and physical therapy - A substantial part of lost wages if they need time off during recovery - Disability benefits, which help pay medical bills and replace some of the wages lost if work-related injuries cause temporary or permanent disability - Funeral expenses in case of a work-related death ### How are workers’ compensation income replacement benefits calculated? Workers’ comp income replacement benefits (also known as “lost wage” or “indemnity” benefits) are calculated based on an injured or sick worker’s degree of disability. The various levels include temporary total disability, permanent total disability, temporary partial disability and permanent partial disability. (A distinction is made between disability and impairment, with impairment generally defined as a reduction in earnings capacity.) Once the degree of disability has been determined, injured workers receive a percentage of their average weekly wage (actual or state average) for the previous year. Most states require that benefits be paid for the duration of a worker's disability, but some specify a maximum time period. Also, most states enforce a waiting period before benefits for a temporary disability are distributed, though these vary by state, and there are exceptions. ### 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. A [business owner's policy (BOP)](https://insurance.adp.com/what-we-offer/business-insurance/business-owners-policy.aspx) 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. ### How does a workers' compensation claim affect a small business? 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. ### What is the minimum amount of workers' compensation insurance required? Laws and regulations regarding workers’ compensation vary by state and circumstances. Employers should consult a licensed insurance agent to understand specific coverage requirements. ### Does a sole proprietor need to have workers' compensation insurance? 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. ## Get a quote Want to speak with us right away? Call us at: [855-237-2667](tel:8552372667) By submitting this form, you acknowledge that you have read our [Privacy Statement for Business Contacts](/privacy) and agree to our [Terms of Use](/legal). 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. Must be an ADP Payroll client using RUN Powered by ADP® or ADP’s Workforce Now® and have a workers’ compensation policy brokered by ADPIA. ADP's Pay-by-Pay Premium Payment Program is a payroll enhancement feature of ADP's payroll processing services. Clients must be using ADP's tax filing service to take advantage of Pay-by-Pay. Pay-by-Pay is not available with all carriers. Talk to a licensed ADPIA agent for more details. 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 Powered by ADP and/or Workforce Now 5. Based on a 2022 survey of 697 ADPIA clients using ADP’s Pay-by-Pay® Premium Payment Program. \* FAQs are general and not intended as tax or legal advice. If you have any questions, contact a tax or legal professional.