Here's something that surprises most New York business owners: you need workers' compensation insurance from day one. Not when you hire your fifth employee. Not when you're profitable. From the moment you hire your first employee—even if it's your cousin working part-time—you're legally required to have coverage. And if you're thinking about skipping it? New York doesn't mess around. We're talking felony charges and fines up to $50,000.
New York's workers' compensation system is one of the strictest—and most expensive—in the country. But it also provides some of the most comprehensive protections for injured workers. Whether you're running a bodega in Brooklyn, a tech startup in Manhattan, or a farm upstate, understanding these requirements isn't optional. Let's break down everything you need to know.
Who Needs Workers' Compensation in New York?
The short answer: basically everyone. New York law requires all for-profit businesses with at least one employee to carry workers' compensation insurance. This includes full-time workers, part-time workers, seasonal help, and even family members on your payroll. If you're paying someone to work for you, you need coverage.
There are a few specific scenarios worth highlighting. If you're a homeowner who hires domestic help—a nanny, housekeeper, or companion—for 40 or more hours per week, you need coverage. Farm employers who pay more than $1,200 in wages during a calendar year must provide it. Even nonprofit organizations are typically required to carry workers' comp insurance.
Now, if you're a sole proprietor with no employees, you're off the hook—coverage isn't mandatory for you personally. The same goes for partners in a partnership or LLC members who don't have employees. Corporate officers with one additional owner or fewer and no employees are also excluded from mandatory coverage. But here's the thing: you can elect to include yourself in coverage if you want that protection. Many business owners do, especially in higher-risk industries.
The Real Cost: Why New York's Rates Are So High
Let's talk money. New York consistently ranks among the most expensive states for workers' compensation insurance. Your actual rate depends on your industry classification code and your claims history, but the baseline costs are significantly higher than most other states.
There is some good news on the horizon. In 2024, the assessment rate dropped to 9.2%, down 6% from the previous year, saving New York businesses about $53 million. For 2025, it's dropping even further to 7.1%—a 22% reduction that translates to roughly $191 million in collective savings for employers. Additionally, workers' compensation loss costs decreased by an average of 9% for policies starting October 1, 2024 or later.
If you're having trouble finding affordable coverage—or if private insurers have turned you down—there's a safety net. The New York State Insurance Fund (NYSIF) is a nonprofit agency that serves as the insurer of last resort. They're required to provide coverage to any employer who needs it, regardless of their industry or claims history. Their Loss Cost Multiplier sits at 1.27, and while they're not always the cheapest option, they ensure that no employer is left without the legally required coverage.
What Workers' Comp Covers (And What It Doesn't)
When an employee gets hurt on the job, workers' compensation kicks in to cover their medical expenses and lost wages. Medical coverage is comprehensive—we're talking doctor visits, surgery, physical therapy, prescription medications, assistive devices like crutches or wheelchairs, and even travel expenses related to medical treatment. Dental and optometry care related to the injury are covered too.
For lost wages, here's how it works: if your employee misses at least seven days of work due to their injury or illness, they become eligible for weekly cash benefits. If they're out for 14 days or more, those benefits are retroactive to day one. The minimum weekly benefit increased to $275 in 2024 and jumps to $325 in 2025, ensuring injured workers have meaningful income replacement.
In the tragic event that an employee dies from a work-related injury, their surviving spouse and minor children receive weekly benefits. The policy also covers funeral and memorial expenses—up to $12,500 in the New York City metro area (Bronx, Kings, Nassau, New York, Queens, Richmond, Rockland, Suffolk, and Westchester counties) and $10,500 in other parts of the state.
Starting January 1, 2025, New York is expanding coverage in a significant way. Workers can now file claims for mental injury resulting from extraordinary work-related stress. This is a big deal—it acknowledges that workplace injuries aren't always physical and provides a path for employees dealing with severe psychological trauma from their jobs.
The Penalties: Why You Don't Want to Skip Coverage
New York does not take workers' compensation violations lightly. If you're caught operating without coverage, the consequences escalate quickly based on your company size and history.
For employers with five or fewer employees, failing to carry coverage is a misdemeanor punishable by fines between $1,000 and $5,000. Not great, but manageable. But if you have more than five employees? It becomes a Class E felony. You're looking at potential imprisonment for up to four years and fines ranging from $5,000 to $50,000. That's not a typo—fifty thousand dollars.
If you've been penalized before, the consequences get even harsher. Repeat offenders within 10 years face Class E felony charges with fines between $10,000 and $25,000. If you're convicted twice within five years, it escalates to a Class D felony with fines between $10,000 and $50,000, plus potential jail time. There's also a civil penalty of up to $2,000 for every 10-day period of noncompliance.
Beyond the financial and criminal penalties, a felony conviction triggers a five-year ban from bidding on public works contracts. For many businesses, that alone could be devastating. The message is clear: workers' compensation isn't optional in New York, and the state has the teeth to enforce it.
How to Get Started and Stay Compliant
Getting workers' compensation coverage isn't complicated, but it does require action before you hire that first employee. Start by reaching out to insurance agents or brokers who specialize in commercial coverage. They'll help you determine your classification code based on the type of work your business does—a construction company has different risk levels than a consulting firm, which directly affects your premium.
If you're having trouble finding coverage through traditional insurers, contact the New York State Insurance Fund. They're legally obligated to provide coverage and can give you a quote regardless of your situation. Once you have coverage, you must post proof of it in a visible location at your workplace. This is a legal requirement, not a suggestion.
Staying compliant means maintaining continuous coverage. If your policy lapses—even for a day—you're technically operating illegally and subject to penalties. Set up automatic payments if possible, and mark your calendar for renewal dates. Your insurance company or broker should send reminders, but the responsibility ultimately falls on you as the employer.
Yes, New York's workers' compensation requirements are strict, and yes, the rates are high. But this system exists to protect both you and your employees. When someone gets hurt on the job, workers' comp ensures they get the medical care and financial support they need—and it protects you from potentially devastating lawsuits. The cost of coverage is just the cost of doing business in New York. The cost of not having it? That's a risk you absolutely cannot afford to take.
