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Workers' Compensation

I'm a Small Business Owner - Why Do I Need Workers' Comp Insurance?

Sarah Tupper
by Sarah Tupper on February 12, 2015

Why do you need workers' comp as a small businessIf a business owner only manages a handful of employees, he or she might be tempted to avoid picking up workers’ compensation insurance. But acquiring workers’ compensation is still an important thing to consider. In some states like California and Florida, even businesses with a single employee are required to have workers’ compensation insurance. And whether coverage is mandated by law or not, workers’ comp is important because it serves as the main remedy for injuries or incidents that occur in a workplace.

Even if a business is small, it can still be held liable for medical bills and lost wages if an employee is injured while working. Workplace accidents are a serious matter, and the consequences can be costly. Workers’ comp provides an important element of financial security to safeguard companies from this risk.

Here are some key things that small business owners should know about workers’ compensation insurance.

First, know if workers’ comp is required in the states where you operate. Most states do require workers’ compensation coverage, but in some states like Texas coverage can be optional.

It’s also important that every employee (including the owner) at a business should be covered for the particular job they do. For example, if an employee performs two different tasks at work—say, a construction worker who specializes in roofing and framing—than that employee should be covered for each specific task, or class code, as well as the proportion of time that he or she spends at each task.

It’s important for business owners to know that good and bad safety performance affects workers’ comp insurance premiums. The state government regulates rates for workers’ comp, and those rates can be raised or lowered depending on the overall safety performance of a business over a three-year period. If a business does poorly, then rates can go up, but if a business does well, then they may earn discounts. So, if injuries are avoided, safety rules and regulations are enforced, and employees are encouraged to receive safety training, then businesses are much more likely to pay less in premiums.

Be aware that Professional Employer Organizations (PEO’s) offer workers’ compensation as part of their overall professional employer organization (PEO) package, and there are a number of unique benefits. With FrankCrum for example, there is no down payment or the need for an annual workers’ comp audit. You simply pay as you go in synch with your payroll cycle, often at lower premium rates than you can get on the open insurance market. FrankCrum also offers resources and assistance to mitigate the risks that can result in accidents in the first place.

A Business Owner's Guide to HR


Sarah Tupper
Sarah Tupper

Sarah Tupper, Vice President of Direct Sales, leads the Direct Sales team at FrankCrum with a unique blend of experience in sales, corporate training and motivational speaking. Prior to FrankCrum, Sarah was a corporate trainer for 13 years.