Do businesses need workers compensation insurance before hiring?

Workers' Compensation Insurance Requirement in Michigan Before Hiring

In Michigan, businesses must secure workers' compensation insurance before hiring employees. This insurance provides coverage for medical expenses and lost wages if an employee is injured on the job.

When Workers' Compensation Insurance Is Required

• Mandatory Coverage: Most employers with one or more employees are required to carry workers' compensation insurance.
• Exemptions: Certain small employers and specific types of businesses may be exempt, but these are limited and should be verified.
• Start of Coverage: Insurance must be in place before the first employee begins work to ensure compliance and avoid penalties.

Operational Steps for Compliance

• Obtain Insurance: Contact an authorized insurance provider or the Michigan Workers' Disability Compensation Agency to arrange coverage.
• Register Your Business: Ensure your business is properly registered with the state, as this is often required to obtain insurance.
• Maintain Records: Keep accurate records of all employees and insurance policies for reporting and audit purposes.
• Review Annually: As of 2026, review your insurance coverage regularly to match changes in payroll or workforce size.

Related Operational Considerations

Alongside workers' compensation insurance, businesses should consider payroll setup, employee classification, and compliance with Michigan labor laws to streamline hiring and onboarding processes.