If you're running a business in Michigan, workers' compensation insurance isn't just a good idea—it's the law for most employers. But here's what makes Michigan different from many other states: the rules are surprisingly straightforward, and the costs are among the lowest in the nation. Whether you're hiring your first employee or managing a growing team, understanding Michigan's workers' comp requirements can save you from costly penalties and protect both your business and your workers when accidents happen.
The reality is that workplace injuries happen even in the safest environments. When they do, workers' comp steps in to cover medical bills, replace lost wages, and provide rehabilitation services—all without your employee needing to sue you. It's a system designed to protect everyone involved, and in Michigan, it works efficiently and affordably.
Who Needs Workers' Compensation Insurance in Michigan?
Michigan's requirements are clear: if you employ one or more people working 35 hours or more per week for 13 consecutive weeks or longer during the past year, you must carry workers' compensation insurance. Notice that's not full-time employees necessarily—part-timers count toward this threshold too. If you employ three or more people at any one time, even part-time, you're also required to have coverage regardless of how long they've worked.
For agricultural employers, the bar is slightly higher: you need coverage if you employ three or more people working 35+ hours per week for 13 consecutive weeks. Householders employing domestic help follow the same rule as general employers—coverage is mandatory if someone works 35+ hours weekly for 13 weeks or more. All public employers must have coverage, no exceptions.
The penalties for not carrying required coverage are serious. Michigan treats uninsured employers harshly—you could face substantial fines, be held personally liable for all injury costs, and even face criminal charges in some cases. It's simply not worth the risk.
Common Exemptions: When You Don't Need Coverage
If you're a sole proprietor with no employees, you're exempt from the requirement—though you can voluntarily purchase coverage for yourself if you want. Corporate officers and LLC members who own at least 10% of the company can also exclude themselves from coverage by filing Form BWC 337 with the Bureau of Workers' Disability Compensation. But here's the critical point: even if you qualify for an exemption, your employees must still be covered. These exemptions apply only to owners, not the people you hire.
Independent contractors are another gray area that trips up many business owners. True independent contractors don't need to be covered under your policy, but Michigan has specific criteria for classifying someone as an independent contractor versus an employee. If you misclassify an employee as a contractor to avoid coverage, you could face penalties and be liable for their injuries. When in doubt, cover them—it's the safer route.
What Workers' Comp Costs in Michigan
Here's some good news: Michigan businesses pay an average of just $70 per month for workers' compensation insurance—about $4 below the national average. That works out to roughly $835 annually. Even better, Michigan's average rates run about 22% below the median for the entire United States, making it one of the more affordable states for employers.
That said, your actual cost depends heavily on your industry and the classification codes that apply to your business. Low-risk businesses like speech therapy offices might pay as little as $6 per month, while high-risk operations like roofing companies can face premiums of $787 monthly or more. Your payroll size, claims history, and specific job classifications all factor into your premium calculation.
Michigan uses a unique system where insurance companies can set their own rates for each classification code, administered by the Compensation Advisory Organization of Michigan. This means you can shop around—different insurers may quote you different premiums for the same coverage. For 2024, sole proprietors and partners who choose to include themselves in coverage must use a minimum payroll amount of $24,900 for rating purposes. The maximum weekly compensation rate for injured workers in 2025 is $1,164 ($60,528 annually), calculated at 90% of the state average weekly wage.
What Workers' Comp Covers: Benefits for Injured Employees
When an employee gets hurt on the job, workers' compensation provides three main types of benefits. First, medical benefits cover all reasonable and necessary medical care related to the injury—from emergency room visits to surgery, medications, physical therapy, and ongoing treatment. These benefits can continue for life if the injury requires it, as long as the treatment remains medically necessary and related to the workplace injury.
Second, wage loss benefits kick in if the injury forces your employee to miss work. Here's how the timing works: there's a seven-day waiting period, so if someone is out for less than a week, they won't receive wage replacement. But if they're disabled for eight days or more, benefits start on day eight. If the disability lasts 14 days or longer, they'll get paid retroactively for that first week too. The benefit amount is roughly 80% of their after-tax wages, which typically replaces most of their take-home pay.
Third, vocational rehabilitation services help workers who can't return to their previous job due to their injuries. This might include job retraining, education programs, or job placement assistance—whatever it takes to get them back into the workforce. Research shows that Michigan's overall costs per workers' compensation claim average $31,735, the lowest among 17 states studied, which demonstrates the system's efficiency.
The Claims Process: What to Expect When Someone Gets Hurt
When a workplace injury happens, timing matters. The injured employee must notify you within 90 days—this can be verbal, though a written accident report is always better for documentation. From there, the employee has up to two years from the injury date to file a claim for medical benefits, and one year for wage loss benefits.
As the employer, you should report the injury to your insurance carrier immediately and provide a claim form. Medical treatment should begin right away—there's no waiting period for medical care. For the first 28 days, you have the right to choose which doctor your employee sees. After that 28-day window, they can switch to a doctor of their choice as long as they notify you and the insurance company in writing.
Getting Coverage: Your Next Steps
Shopping for workers' compensation insurance in Michigan is straightforward. Start by getting quotes from multiple carriers—remember, insurers can set their own rates, so prices will vary. You'll need accurate information about your payroll, job classifications, and business operations. Be honest about what your employees actually do, as misclassifying job duties to get lower rates can backfire if there's a claim.
Consider working with an insurance agent who specializes in commercial coverage—they can help you navigate classification codes, find competitive rates, and ensure you're meeting all legal requirements. Many agents can quote multiple carriers at once, saving you time and often finding better pricing than you'd get on your own. The investment in proper coverage and expert guidance pays for itself by protecting your business from potentially devastating out-of-pocket costs if an employee gets seriously injured. Don't wait until you're legally required—get covered before you hire that first person, because injuries can happen on day one.
