Insurance
Do I need workers’ comp for my first employee?
Short answer: in most states, yes. Once you hire a W-2 employee in a trade like plumbing, electrical, or HVAC, your state almost certainly expects you to carry workers’ compensation from the first day. There is no single federal rule for private employers, though, so the exact threshold, exemptions, and penalties come from your state.
Key takeaways
- Workers’ comp for private employers is governed by state law, not federal law.
- Some states start coverage at the first employee; a few have higher headcount thresholds or, like Texas, let most employers opt out with a filed notice. Construction is often treated more strictly.
- Premium is usually rate × (payroll ÷ 100), with the rate set by your class code and state.
On this page
Who sets the rule
The U.S. Department of Labor runs workers’ comp programs for federal workers and a few special groups, but it points private employers to their state. Its DOL list of state workers’ compensation offices links to every state agency. The SBA hire and manage employees guide also says businesses with employees must carry workers’ compensation insurance, and that the details are set by the state.
That means the answer to “do I need it for one employee?” is really “what does my state say?” Many states require coverage as soon as you have one employee. Some set a higher number of employees before coverage is mandatory but apply stricter rules to construction trades. Texas is the well-known exception: most private employers can choose not to carry it, but a Texas non-subscriber must file a notice with the Division of Workers’ Compensation within 30 days of hiring its first employee and again each year (Texas DWC non-subscriber page), and gives up some legal defenses if a worker sues.
Because we cannot verify every state’s threshold here, we won’t list them. Look up your state agency and read its employer page before your helper’s first day.
Why it matters even if you’re small
Trade work involves ladders, power tools, attics, and trenches. If an uninsured employee is hurt, many states can fine you, stop work on your jobs, and make you personally responsible for medical bills and lost wages. General contractors and some customers also ask for a certificate of insurance before you can work on their sites. As the owner, you may be able to exclude yourself from coverage in some states, but your employee generally cannot be left out.
How premiums are priced
Most policies charge a rate per $100 of payroll for each class code. The basic formula is:
Premium = (annual payroll ÷ 100) × class rate, then adjusted by any experience modifier, minimum premium, and carrier credits or fees.
A worked example with a hypothetical rate: one helper earning $41,600 a year, at $3.00 per $100, is 416 × $3.00 = $1,248 a year, or about $0.60 per paid hour. If your carrier’s minimum premium is higher than that, you pay the minimum. If the rate for your class in your state is $6.00, the premium doubles. Real rates for the same trade can differ by several times between states, which is why we use a placeholder and not a “national average.”
Class codes matter. Many states use NCCI codes, such as 5183 for plumbing (see our class 5183 guide) and 5190 for electrical work. Others, including some large states, run their own classification systems. Ask your agent which code fits the work your helper will actually do, because the wrong code can mean a big bill at audit.
How to get covered
- Find your state’s rule through the DOL list of state agencies.
- Get quotes from a licensed agent, a carrier, or your state fund if your state has one. Some payroll providers offer pay-as-you-go policies that bill premium each payroll based on actual wages.
- Expect a year-end audit: the carrier compares your estimated payroll with real payroll and bills or refunds the difference.
- Post any required notices for employees. Your state agency lists them, and the DOL has a DOL workplace posters tool for federal ones.
Put the quote into the true-cost calculator to see how it changes your hourly cost. For the Indiana-specific rules, see workers’ comp for one employee in Indiana.
Add your quote Enter a workers’ comp rate in the calculator and see the true hourly cost.
Open the calculatorFrequently asked questions
Do I need workers' comp if I only have one employee?
In most states, yes, especially in construction trades. Workers' compensation for private employers is set by state law, so check your state agency. Texas lets most private employers opt out, but they must file a non-subscriber notice within 30 days of hiring their first employee.
How much does workers' comp cost for one employee?
It is usually priced per $100 of payroll by class code. At a hypothetical $3.00 per $100, a helper earning $41,600 costs about $1,248 a year. Real rates vary widely by state and trade, and policies often have a minimum premium, so get a quote.
Do I have to cover myself as the owner?
It depends on your state and business structure. Many states let sole proprietors or certain owners exclude themselves, while employees generally must be covered. Ask your state agency or agent.
Federal figures were checked against 2026 IRS Publication 15 and the linked official pages in November 2026. Rows marked hypothetical are examples only. State rules and rates vary; confirm with your state agencies, an insurance agent, and your accountant before you hire.