What insurance is required when hiring workers?

Required Insurance When Hiring Employees in California

When hiring employees in California, businesses must secure specific types of insurance to comply with state regulations and protect both the company and its workforce.

Key Insurance Requirements

• Workers’ Compensation Insurance: This is mandatory for almost all employers with one or more employees. It covers medical expenses and lost wages for employees injured or ill due to work-related activities. Businesses must obtain this insurance before employees begin work.
• Unemployment Insurance: Employers are required to register with the California Employment Development Department (EDD) and pay unemployment insurance taxes. This insurance provides temporary benefits to employees who lose their jobs through no fault of their own.
• Disability Insurance: California mandates participation in the State Disability Insurance (SDI) program, which provides partial wage replacement for employees unable to work due to non-work-related illness or injury. Employers deduct SDI contributions from employee wages and remit them to the EDD.

Additional Operational Considerations

• Employer Liability Insurance: While not required by law, many California businesses choose to carry employer liability insurance to cover claims related to employee injuries or illnesses not covered by workers’ compensation.
• Recordkeeping and Reporting: Maintain accurate records of all insurance policies, claims, and employee classifications. Timely reporting to the EDD and the California Division of Workers’ Compensation is essential for compliance.
• Payroll Integration: Automate payroll processes to ensure proper withholding and remittance of insurance-related taxes and premiums, reducing errors and administrative overhead.

As of 2026, staying updated with California’s Department of Industrial Relations and Employment Development Department guidelines will help ensure compliance and smooth operational management when hiring employees.