In most states, you will be required to buy workers compensation insurance on hiring your fifth employee.
This allows some flexibility for very small companies. When it's just you and a few friends you're keeping around part-time, it may be too early to really start thinking about workers compensation insurance — as there's no telling yet if this business is built to last. Likewise, many family businesses may not need insurance because everyone who works for the company is part of the same family.
This means that if you don't really have a staff, but you do have a full-time assistant or a building manager — someone who's there just to make your job easier — you are not legally required to buy workers compensation insurance in most instances.
Of course, this only answers the question of whether you are legally required to carry workers compensation insurance for your employee. The question remains: Should you buy workers compensation coverage when you have just one employee? Here are a few things to consider:
Workers compensation insurance benefits the employee, but it also benefits the employer. When your employees and staff are covered, they have no reason to try and prove in a court of law that an injury sustained on the job was your fault. Likewise, they have no reason to go to the press with the allegation, and they have no reason not to come right back to work before it’s medically safe to do so. If there is a realistic chance that your employee may be injured in the line of duty, you owe it to them — and to yourself — to invest in workers compensation insurance. This is the case even if it's not technically a legal requirement.
- Some small business owners invest in workers compensation insurance even though they work alone.
- Leaving an employee unable to pay their bills may open you up to a lawsuit.
- You don't want to lose a good assistant. But you certainly will if you leave them out to dry after an injury.
- The bad press resulting from inadequate insurance can sink a thriving business.