Do businesses need workers compensation insurance before hiring?

Workers' Compensation Insurance Requirements for Hiring in New Mexico

In New Mexico, businesses must understand their obligations regarding workers' compensation insurance before hiring employees. This insurance is designed to cover medical expenses and lost wages for employees injured on the job.

When is Workers' Compensation Insurance Required?

• As of 2026, any business with three or more employees (full-time or part-time) is required to carry workers' compensation insurance.
• This requirement applies regardless of whether employees are paid hourly, salaried, or as contractors classified as employees.
• Businesses with fewer than three employees are generally exempt but should verify their status if hiring grows.

Operational Steps Before Hiring

• Obtain workers' compensation insurance coverage through a private insurer or the New Mexico Workers' Compensation Administration.
• Register your business with the New Mexico Workers' Compensation Administration to comply with reporting and recordkeeping requirements.
• Ensure proper employee classification to avoid misclassification, which can lead to penalties and gaps in coverage.
• Integrate insurance costs into payroll and budgeting processes to maintain compliance and financial planning.

Additional Considerations

• Maintain accurate records of all employees and their coverage status as part of your compliance and auditing processes.
• Review your insurance policy annually or when hiring additional employees to adjust coverage as needed.
• Consider automation tools to streamline reporting and recordkeeping related to workers' compensation.