Do I Need Workers' Comp for My First Hire? (And What Happens If I Skip It)
Thinking about hiring your first employee? Here's what you need to know about workers' comp insurance, and why skipping it could cost you a lot more than you think.
Published under The Human Resources Hat on HatStacked.com
You’re about to hire your first employee. You’ve made the job offer, picked a payroll provider, and even figured out where they’ll sit. But then someone asks, “Hey, do you have workers' comp?” Cue Google panic.
Hiring someone is exciting. It also comes with a side of legal spaghetti no one tells you about until it’s tangled around your ankles. One of the first questions small business owners run into is this:
“Do I really need workers' comp insurance if I only have one employee?”
The short answer? Probably.
The long answer? Definitely maybe.
Let’s break it down.
What Is Workers’ Comp, and Why Does It Matter?
Workers' compensation insurance helps cover medical expenses and lost wages if an employee gets hurt on the job. It also protects you from lawsuits.
In most states, once you hire your first employee, you’re required by law to carry it. Yes, even if they’re part-time. Yes, even if they just work in an office and their most dangerous activity is reaching for the coffee pot.
There are some exceptions (we’ll get to those), but in general:
No workers’ comp = big legal and financial risk.
What Happens If You Don’t Have It?
Let’s say you skip it. What’s the worst that could happen?
- Fines and penalties from your state labor department
- Out-of-pocket medical bills if your employee is injured
- Potential lawsuits, even from employees you know and trust
- Your business shuts down until you get coverage
Basically, skipping workers' comp is like saying, “I’m fine driving without brakes. What could go wrong?”
And if you think you’re safe because your employee “is just helping out” or “won’t get hurt,” you might end up like that time we skipped a basic IT precaution and took down our own store:
Related: I Broke Our Online Store (Because I Didn’t Know Better)
Do All States Require It?
Nope. But most do.
Some states (like Texas) make it optional, but you’ll still be on the hook if anything happens. Other states have strict thresholds, like:
- Coverage required if you have 1 or more employees (California, New York, most others)
- Coverage required at 3 or more employees (Florida, some others)
- Coverage not required but strongly encouraged
You can check your state’s rules at workerscompensation.com
Common Myths (That Might Get You Sued)
Myth 1: “They’re an independent contractor, so I don’t need coverage.”
Nice try. If they work under your direction, use your tools, or are misclassified, you might still be liable.
Myth 2: “It’s just a temp or intern.”
Still an employee. Still your responsibility.
Myth 3: “I can just pay their medical bills if something happens.”
That won’t stop legal action. Or back taxes. Or insurance audits.
How Much Does It Cost?
Workers' comp insurance varies based on:
- Your state
- Your industry risk level
- Payroll size
- Claims history
For many small service-based businesses, premiums range from $300–$1,000 per year for your first hire.
It’s not nothing. But it’s a whole lot cheaper than a lawsuit.
Where to Get Workers’ Comp Insurance
You can usually buy it through:
- Private insurance companies
- Your state’s workers' comp fund
- Online brokers like Pie Insurance, Cerity, or Simply Business
- Payroll providers like Gusto, QuickBooks Payroll, or Paychex often help you set it up
Just make sure your policy starts before your employee does.
Real Talk: Is Anyone Checking?
Maybe not at first. But if your employee gets hurt and files a claim, or if a state audit happens, or if someone files a whistleblower complaint… suddenly, everyone’s checking.
And they’re not going to like what they find if your answer to “Do you have workers' comp?” is “What's that?”
Bottom Line
If you’re hiring, don’t skip this. Even if your employee never lifts anything heavier than a keyboard. Even if you think you’ll “figure it out later.”
Workers' comp is one of those boring-but-crucial protections that keeps a one-employee operation from becoming a one-lawsuit disaster.
It’s part of doing it right.
