Glossary · Compliance
What is Workers' compensation
Definition
Mandatory insurance covering workplace injury. Premiums are set by state and job class code, and form a large part of employment burden in manual niches.
Applies to: US · Reviewed by James Doyle
In practice
A clerical class code might cost under 1% of payroll; a construction or warehouse code can be many multiples of that. Your niche choice is also an insurance decision.
Misclassifying a job code to reduce premium is treated as premium fraud and is uncovered at audit, with retrospective billing.
Related terms
Employment burden
Every employer cost on top of the pay rate: payroll taxes, workers' compensation, holiday accrual and benefits. Typically 12% to 16% in the US.
ReadState registration
Registering with a state to withhold payroll taxes and, in some states, to operate as a staffing agency. Required where your worker performs the work.
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