Michigan Workers’ Compensation Insurance: Requirements, Coverage, and Cost
Workers’ compensation insurance helps protect Michigan employees and employers when a worker experiences a job-related injury or occupational illness. It can provide medical treatment, partial wage replacement, disability benefits, and rehabilitation services while helping businesses meet their legal obligations.
Whether you’re starting a small business, hiring your first employee, managing a construction crew, or operating an established company, understanding Michigan workers’ compensation requirements is an important part of protecting your business.
This guide explains who needs coverage, which businesses may qualify for exclusions, what benefits are available, how premiums are calculated, and what happens when an employer fails to maintain required insurance.
Most private Michigan employers must carry workers’ compensation insurance if they regularly employ three or more employees at one time, including part-time employees, or regularly employ at least one employee working 35 or more hours per week for 13 weeks or longer during the preceding 52 weeks.
Different requirements apply to agricultural employers, household employers, and public employers. Business ownership structure and eligibility for exclusions can also affect coverage obligations.
What Is Workers’ Compensation Insurance?
Workers’ compensation is a system that provides certain benefits to employees who suffer injuries or illnesses arising out of and in the course of their employment.
Michigan operates under a workers’ compensation system that generally does not require an injured employee to prove the employer’s negligence to qualify for benefits.
In exchange, workers’ compensation is generally the employee’s exclusive remedy against the employer for covered workplace injuries, although legal exceptions exist.
Workers’ compensation serves two important purposes:
- Employee protection: Provides eligible medical care, wage-loss benefits, and rehabilitation assistance following a covered workplace injury or illness.
- Employer protection: Helps businesses satisfy legal insurance requirements and limits certain liabilities arising from covered workplace injuries.
Who Needs Workers’ Compensation Insurance in Michigan?
Michigan’s Workers’ Disability Compensation Act establishes several categories of employers that must maintain workers’ compensation coverage.
Private Employers
Private employers generally must provide coverage when they meet either of these requirements:
- Regularly employ three or more employees at one time, including part-time workers.
- Regularly employ one or more employees for at least 35 hours per week for 13 weeks or longer during the preceding 52 weeks.
Agricultural Employers
Agricultural employers generally must carry workers’ compensation when they employ three or more workers for at least 35 hours per week for 13 or more consecutive weeks.
Household Employers
Households employing domestic workers generally must provide coverage when an employee works at least 35 hours per week for 13 weeks or longer during the preceding 52 weeks.
Public Employers
Michigan public employers generally must provide workers’ compensation coverage.
The Michigan Workers’ Disability Compensation Agency explains these requirements in its Workers’ Disability Compensation Insurance Requirements guide.
Do Sole Proprietors and LLC Owners Need Workers’ Compensation?
One of the most common questions from Michigan small business owners is whether workers’ compensation is required when they work alone or operate through an LLC.
The answer depends on the business’s legal structure, who performs the work, and whether an exclusion applies.
Sole Proprietors
A sole proprietor working in their own sole proprietorship is not considered an employee of that business under Michigan’s workers’ compensation requirements.
However, hiring employees can trigger the requirement to carry coverage. Sole proprietors should evaluate employee hours and staffing levels before assuming they are exempt.
Limited Liability Companies (LLCs)
LLCs have different considerations. Michigan generally treats an LLC member who is a manager as an employee for purposes of the Workers’ Disability Compensation Act.
Depending on the company’s ownership structure and eligibility, certain owners may qualify for an exclusion. An LLC should not assume that having only its owners working automatically eliminates all insurance obligations.
Corporations and Partnerships
Michigan workers’ compensation law generally treats corporate officers and partners as employees. Certain businesses may qualify for statutory exclusions, but they must meet the applicable requirements.
When a business uses employees or subcontractors, it may have additional insurance obligations.
Michigan Workers’ Compensation Exemptions and Exclusions
Some Michigan businesses may not meet the statutory employee thresholds, while others may qualify for exclusions based on their ownership structure.
Potential situations include:
- A sole proprietor operating without employees.
- A business that does not meet the applicable employee thresholds.
- Qualifying owners, partners, or corporate officers who meet Michigan’s statutory exclusion requirements.
However, you should never assume an exemption solely because a business is small, family-owned, or organized as an LLC.
What Is Michigan Form WC-337?
Michigan uses Form WC-337, Notice of Exclusion, for certain qualifying exclusions from workers’ compensation coverage.
The form is not available for general online download. Eligible businesses must contact the Michigan Workers’ Disability Compensation Agency to obtain it.
A Notice of Exclusion is not valid unless the agency stamps it to show it is on file.
Visit the state’s WC-337 Notice of Exclusion information page for eligibility and contact information.
Do Independent Contractors Count as Employees?
Classifying someone as an independent contractor does not automatically remove workers’ compensation obligations.
Michigan evaluates employment relationships using statutory criteria, including whether the worker operates an independent business, offers services to the public, and employs other workers.
A worker receiving Form 1099 may still be considered an employee for workers’ compensation purposes depending on the actual working relationship.
This issue is especially important for construction contractors, property maintenance businesses, cleaning companies, and other businesses that regularly use subcontractors.
A 1099 tax form does not prove someone is exempt from workers’ compensation requirements. Businesses should verify worker classification and applicable insurance obligations before work begins.
What Does Michigan Workers’ Compensation Cover?
Workers’ compensation can provide several types of benefits when an employee experiences a qualifying work-related injury or occupational illness.
Medical Expenses
Covered medical benefits may include:
- Doctor visits and specialist treatment
- Emergency medical care
- Hospital treatment and surgery
- Prescription medications
- Physical therapy and rehabilitation
- Other reasonable and necessary medical services related to the covered injury
Michigan generally provides medical benefits from the date of a covered workplace injury. The seven-day waiting period for wage-loss benefits does not apply to medical treatment.
Lost Wage Benefits
When a covered injury causes an employee to lose wages or wage-earning capacity, workers’ compensation may provide partial wage replacement.
The benefit amount depends on the employee’s earnings, disability, wage-earning capacity, applicable offsets, and Michigan benefit limits.
Disability Benefits
Workers’ compensation may provide benefits for qualifying partial or total disabilities that affect an employee’s ability to earn wages.
The amount and duration of benefits depend on the injury circumstances and applicable Michigan law.
Vocational Rehabilitation
Employees who cannot return to their previous jobs because of a covered injury may qualify for vocational rehabilitation services.
These services can include job training, employment assistance, and other support intended to help an injured worker return to suitable employment.
Death and Survivor Benefits
When a covered workplace injury or occupational illness results in an employee’s death, workers’ compensation may provide certain benefits to eligible dependents and burial-related benefits under Michigan law.
What Workplace Injuries and Illnesses May Qualify?
Workers’ compensation can apply to both sudden workplace accidents and certain medical conditions that develop because of employment.
Examples include:
- Slip-and-fall injuries occurring during work
- Back and shoulder injuries from lifting
- Machinery and equipment accidents
- Repetitive motion injuries
- Certain occupational illnesses caused by workplace exposure
- Injuries occurring while performing qualifying job-related travel
Coverage depends on whether the injury or illness arose out of and in the course of employment, along with the facts and supporting medical evidence.
What Workers’ Compensation May Not Cover
Not every employee injury qualifies for workers’ compensation benefits.
Claims may be disputed when an injury is unrelated to employment, occurs during personal activities, or does not meet Michigan’s legal requirements for a compensable injury.
Ordinary travel between home and a regular workplace is generally excluded, although exceptions may apply to certain work-related travel situations.
How Much Does Workers’ Compensation Pay in Michigan?
Michigan workers’ compensation wage-loss benefits are generally calculated using approximately 80% of an injured worker’s after-tax average weekly wage, subject to statutory maximums, offsets, and other applicable rules.
Michigan’s statutory calculation methods determine the average weekly wage. In many cases, the calculation considers the highest 39 weeks of earnings during the 52 weeks preceding the injury.
The actual benefit can differ depending on the employee’s work history, disability, ability to perform other work, and benefits received from other sources.
If an injured worker’s calculated after-tax average weekly wage is $800, an 80% calculation would equal $640 per week before considering applicable statutory limits, offsets, or other adjustments.
This is an illustrative calculation, not a guaranteed benefit amount.
Michigan Workers’ Compensation Seven-Day Waiting Period
Michigan has a seven-day waiting period for wage-loss benefits.
- Days 1–7: Wage-loss benefits generally are not payable for the initial seven-day period unless the disability continues long enough to meet the additional requirement.
- Beginning Day 8: Wage-loss benefits generally become payable when the disability continues beyond seven days.
- 14 Days or Longer: If the disability continues for at least 14 days, benefits may also become payable for the initial seven-day period.
The waiting period applies to wage-loss benefits. Reasonable and necessary medical treatment for a covered injury generally begins without a corresponding waiting period.
Michigan Workers’ Compensation Requirements by Industry
Workers’ compensation requirements apply across many industries, but workplace risks and insurance costs can differ substantially.
Construction and Contractors
Construction businesses often face significant workers’ compensation considerations because of physical labor, equipment use, elevated work areas, and subcontractor relationships.
Accurate payroll classifications and verification of subcontractor coverage are particularly important for contractors.
Restaurants and Food Service
Restaurants, cafes, and food service businesses frequently employ a combination of full-time and part-time workers.
Part-time employees count toward Michigan’s three-employee threshold. Kitchen injuries, slips, burns, and lifting injuries are examples of potential workplace exposures.
Cleaning and Property Maintenance
Cleaning companies, janitorial services, landscaping businesses, and property maintenance contractors may have employees performing different types of physical work.
Because job duties affect insurance classifications, accurate descriptions of the work performed are important.
Office-Based Businesses
Professional offices and administrative businesses may have lower physical injury exposure than construction or manufacturing businesses, but they can still be required to carry workers’ compensation insurance.
The legal requirement depends on employment circumstances, not simply whether the work is considered low risk.
Retail and Small Businesses
Retail stores and other small businesses should monitor employee headcount, weekly hours, and seasonal staffing changes.
Hiring additional part-time employees can affect whether a business meets Michigan’s coverage requirements.
Do Nannies and Household Employees Need Workers’ Compensation?
Workers’ compensation requirements can apply to households employing nannies, caregivers, housekeepers, and other domestic employees.
Michigan generally requires household employers to provide coverage when a domestic employee works at least 35 hours per week for 13 weeks or longer during the preceding 52 weeks.
Homeowners insurance should not be assumed to replace workers’ compensation for a household employee’s job-related injuries: employment classification and the specific insurance policy matter.
For more information, read Do You Need Workers’ Compensation Insurance for Nannies in Michigan?.
How Much Does Workers’ Compensation Insurance Cost in Michigan?
Workers’ compensation premiums vary significantly between Michigan businesses.
Unlike some insurance policies that are priced primarily by the number of insured people, workers’ compensation pricing is closely tied to payroll and the type of work employees perform.
Factors That Affect Workers’ Compensation Premiums
- Payroll: Higher covered payroll generally increases the premium exposure.
- Industry classification: Employee job duties determine applicable workers’ compensation classifications.
- Workplace risk: Construction, manufacturing, and certain physical trades may have different rates than clerical operations.
- Claims history: Prior workplace injuries and losses can influence pricing.
- Experience modification: Eligible businesses may have premiums adjusted based on their claims experience relative to similar businesses.
- Insurance company: Rates, underwriting guidelines, and available programs can differ between carriers.
How Workers’ Compensation Premiums Are Calculated
Workers’ compensation premiums commonly use a rate applied to each $100 of payroll, with adjustments for applicable classifications and other rating factors.
Suppose a business has $200,000 in covered annual payroll and an illustrative classification rate of $1.50 per $100 of payroll.
$200,000 ÷ 100 × $1.50 = $3,000
The $3,000 represents a simplified base-premium example. Actual premiums may include additional classifications, experience modifications, minimum premiums, assessments, discounts, and other adjustments.
Can Workers’ Compensation Premiums Change After an Audit?
Yes. Many workers’ compensation policies are initially priced using estimated payroll.
At the end of the policy period, the insurer may review actual payroll, job classifications, and other records to determine whether to adjust the final premium.
Businesses can reduce unexpected audit adjustments by maintaining accurate payroll records, documenting employee job duties, and reviewing classifications when operations change.
What Happens If a Michigan Business Does Not Have Required Workers’ Compensation?
Operating without required workers’ compensation coverage can create serious legal and financial consequences.
Michigan law provides for penalties that may include:
- A $1,000 fine for a violation.
- Imprisonment for at least 30 days and no more than six months.
- Both a fine and imprisonment.
- Each day without required coverage is treated as a separate offense.
- A court order prohibiting the business from employing workers until it obtains proper coverage.
An uninsured employer may also face civil liability if an employee is injured and brings a lawsuit.
Michigan treats each uninsured day as a separate offense when an employer fails to maintain legally required coverage. Businesses should confirm their insurance obligations before hiring employees or expanding operations.
What If Your Business Is Denied Workers’ Compensation Coverage?
Some businesses have difficulty obtaining workers’ compensation coverage through the voluntary insurance market.
This may occur because of the nature of the work performed, previous claims, underwriting restrictions, or other risk factors.
Michigan has a workers’ compensation assigned-risk system, commonly associated with the Michigan Workers’ Compensation Placement Facility, that can provide an insurance option for eligible employers unable to obtain coverage through the standard market.
Licensed insurance agents generally handle applications, and assigned-risk premiums may differ from those available in the voluntary market.
For additional information, see Denied Michigan Workers’ Compensation Insurance? Here’s What to Do.
How to Get Workers’ Compensation Insurance in Michigan
Obtaining workers’ compensation coverage generally begins with understanding your business structure, employee responsibilities, and estimated payroll.
- Determine your coverage requirements. Review your business structure, number of employees, weekly hours, and applicable exclusions.
- Gather business information. Prepare your business name, address, Federal Employer Identification Number, ownership information, and business description.
- Estimate payroll. Identify projected annual payroll and the types of work employees perform.
- Review employee classifications. Make sure job duties are described accurately for insurance rating purposes.
- Request coverage options. Compare available policies, pricing, insurer requirements, and payment options.
- Establish your effective date. Confirm that coverage is in force before employees begin work when insurance is required.
- Maintain accurate records. Keep payroll, employee classification, and insurance records available for policy audits and renewals.
Businesses should also review coverage when adding employees, changing operations, hiring subcontractors, or expanding into new types of work.
How Does a Workers’ Compensation Claim Work in Michigan?
When an employee experiences a work-related injury or illness, the workers’ compensation claim process generally begins with reporting the incident to the employer.
Step 1: Report the Injury
Employees should report workplace injuries to their employer as soon as possible, even when the injury initially appears minor.
Step 2: Obtain Medical Treatment
The injured employee should obtain appropriate medical care. Under Michigan law, the employer generally has the right to select the treating medical provider during the first 28 days of treatment.
After that period, the employee may change providers with the required notice.
Step 3: Notify the Insurance Carrier
The employer should promptly notify its workers’ compensation insurance carrier and provide the information necessary to begin the claims process.
Michigan also requires reporting certain workplace injuries to the Workers’ Disability Compensation Agency, including qualifying disability, death, or specific-loss claims.
Step 4: Claim Review and Benefits
The claim is evaluated to determine whether the injury or illness qualifies for workers’ compensation benefits.
Approved benefits may include medical treatment, wage replacement, and rehabilitation services, depending on the circumstances.
For a more detailed explanation, read How to File a Michigan Workers’ Compensation Claim.
Michigan Workers’ Compensation Frequently Asked Questions
Is workers’ compensation insurance required in Michigan?
Most private employers must carry workers’ compensation if they regularly employ three or more employees at one time or regularly employ at least one employee working 35 or more hours per week for 13 weeks or longer during the preceding 52 weeks. Different requirements apply to certain other employer categories.
Do part-time employees count toward Michigan workers’ compensation requirements?
Yes. Part-time employees count toward Michigan’s three-employee threshold for private employers.
Does a sole proprietor need workers’ compensation insurance?
A sole proprietor working alone is generally not considered an employee of their own sole proprietorship. However, hiring employees can create workers’ compensation insurance obligations.
Does an LLC need workers’ compensation insurance in Michigan?
Possibly. Michigan has specific rules governing LLC members, managers, employees, and qualifying exclusions. LLC owners should verify their requirements rather than assuming that their ownership structure automatically eliminates the need for coverage.
Do independent contractors need workers’ compensation coverage?
Independent contractors may have their own insurance obligations. However, labeling a worker as a contractor or issuing Form 1099 does not automatically establish independent contractor status under Michigan workers’ compensation law.
What does workers’ compensation insurance cover?
Workers’ compensation may provide medical benefits, partial wage replacement, disability benefits, vocational rehabilitation, and certain survivor benefits for qualifying work-related injuries or illnesses.
How much does workers’ compensation pay in Michigan?
Wage-loss benefits are generally calculated using approximately 80% of an injured worker’s after-tax average weekly wage, subject to Michigan benefit limits, offsets, and applicable rules.
What is Michigan’s workers’ compensation waiting period?
Michigan generally has a seven-day waiting period for wage-loss benefits. Benefits may begin on the eighth day, and the first seven days may become payable if the disability continues for at least 14 days. Covered medical treatment is not subject to the same waiting period.
How much does workers’ compensation insurance cost?
Premiums depend on payroll, employee job classifications, workplace risks, claims history, experience modification, and insurance company rating factors. Two businesses with the same number of employees may have very different premiums.
Can a Michigan business be exempt from workers’ compensation?
Some businesses do not meet Michigan’s coverage thresholds, while certain owners or business structures may qualify for statutory exclusions. Form WC-337 may be required for qualifying exclusions.
What happens if an employer does not carry required workers’ compensation?
Michigan law provides for financial penalties, possible imprisonment, and other enforcement actions. An uninsured employer may also face civil liability following a workplace injury.
Can a business obtain workers’ compensation after being denied coverage?
Yes. Eligible Michigan employers that cannot obtain coverage through the voluntary market may have access to the state’s workers’ compensation assigned-risk system.
Official Michigan Workers’ Compensation Resources
For official information about Michigan workers’ compensation requirements, employer obligations, employee benefits, and state forms, visit these Michigan government resources:
- Michigan Workers’ Disability Compensation Agency
- Michigan Workers’ Compensation Insurance Requirements
- Michigan Employer Workers’ Compensation FAQs
- Michigan WC-337 Notice of Exclusion
- Michigan Workers’ Compensation Employee Information
Related Michigan Workers’ Compensation Guides
Explore these related topics for more detailed information about specific workers’ compensation situations:
- Workers’ Compensation Insurance for Nannies and Household Employees
- What to Do If Your Business Is Denied Workers’ Compensation Coverage
- How to File a Workers’ Compensation Claim in Michigan
Review Your Michigan Workers’ Compensation Insurance Needs
Michigan workers’ compensation insurance is an important consideration for businesses with employees. Understanding the coverage requirements, available exclusions, employee benefits, and insurance costs can help business owners make informed decisions.
If you’re starting a business, hiring additional employees, or reviewing an existing policy, a licensed insurance agent can help explain coverage options, payroll classifications, and the information needed to request a workers’ compensation quote.
Review available workers’ compensation insurance options for your Michigan business. Have your business information, employee job duties, and estimated payroll ready when requesting coverage.