You've built your pet grooming business from the ground up—maybe starting in your garage or as a mobile service. Now you're ready to take the next big step: hiring your first employee. Congratulations! But before you post that job listing, there's a critical insurance conversation you need to have. The moment you bring on that first team member, your insurance landscape changes completely, and the penalties for getting it wrong can be severe.
Here's what most pet grooming business owners don't realize: you're not just adding another person to help with the workload. You're triggering a whole set of legal requirements and exposing yourself to new liability risks that didn't exist when you were solo. Let's walk through exactly what insurance you need, what it costs, and how to get it right from day one.
Workers' Compensation: The Non-Negotiable Requirement
In most states, workers' compensation insurance becomes mandatory the moment you hire your first employee. Not your second. Not when you hit five employees. Your first. States like California, New York, and Rhode Island don't mess around—if you have one employee on payroll, you need coverage, period. The penalties for skipping this aren't just fines; some states can hit you with jail time.
Why is this such a big deal for pet grooming specifically? Because your employees face real risks every single day. Dog bites, cat scratches, repetitive strain injuries from bending over grooming tables, slip-and-fall accidents on wet floors, chemical exposure from shampoos and flea treatments—these aren't hypothetical scenarios. They happen. Workers' comp covers medical bills, rehabilitation costs, and partial wage replacement if your employee can't work due to a job-related injury.
The cost is more manageable than you might think. For pet grooming businesses in 2026, you're looking at around $65-$88 per month on average, which breaks down to about $780-$1,057 annually. That's roughly the cost of grooming 10-15 dogs per month. Your actual rate depends on your state's regulations, your payroll size, and—critically—your classification code.
Now, there are exceptions. Florida doesn't require workers' comp until you have four employees. Texas is the wild card—it's the only state where workers' comp is completely optional. But even in Texas, many smart business owners still carry it because if an employee gets hurt and you don't have coverage, they can sue you directly. That lawsuit exposure alone often makes the premium worth it.
Classification Codes: Getting This Right Matters
Here's something that trips up a lot of first-time employers: your workers' comp premium isn't just a flat rate. It's calculated based on classification codes—three- or four-digit codes that identify the type of work your business does and the risk level associated with it. Most states use the NCCI (National Council on Compensation Insurance) system, which assigns rates as a cost per $100 of payroll.
Let's say your class code has a rate of $1.50, and you're paying your new employee $40,000 per year. Your annual workers' comp premium would be roughly $600 ($40,000 ÷ $100 × $1.50). But if you get misclassified—say your insurer puts you in a higher-risk category by mistake—that rate could jump to $3.00, doubling your premium to $1,200. That's why accurate payroll reporting and correct classification from the start are so important.
When you're shopping for workers' comp, talk to your insurance broker about the specific code for pet grooming operations. Don't let them lump you in with a generic retail or service category. The classification affects not just your initial premium but also your annual audits, where the insurer verifies your payroll and adjusts your rate accordingly.
EPLI: Protection From the Interview Onward
Employment Practices Liability Insurance (EPLI) is the coverage nobody thinks about until they need it. And by then, it's too late. Here's the eye-opener: you're exposed to employment-related claims from the moment you conduct your first job interview. If you choose not to hire someone, they could allege discrimination. If you hire them and later terminate them for poor performance, they could claim wrongful termination. If there's any workplace conflict, you could face harassment allegations.
Small businesses are actually the most vulnerable to these claims because they typically don't have HR departments, employee handbooks, or formal policies guiding hiring and firing decisions. You're making judgment calls on the fly, and that's risky. The numbers are sobering: small businesses with fewer than 100 employees face about a 12% chance of having an employment-related charge filed against them. Even if you win the case, the average cost to defend yourself ranges from $75,000 to $125,000 in legal fees alone.
EPLI covers your legal defense costs, settlements, and judgments for claims like discrimination, wrongful termination, sexual harassment, and retaliation. For a pet grooming business with one to five employees, you're looking at premiums between $1,500 and $2,500 per year for a standard $1 million policy. Some insurers offer it as an add-on to your Business Owners Policy (BOP) for as little as $18 per employee per year, which is incredibly affordable given the protection it provides.
The smart move? Get EPLI before you start interviewing candidates. At minimum, have it in place by the time your first employee starts their first day. This isn't just about protecting your bank account—it's about protecting the business you've worked so hard to build.
Navigating State-Specific Requirements
Workers' comp laws vary wildly by state, and understanding your specific requirements is crucial. In North Dakota, Ohio, Washington, and Wyoming, you can't just call any insurance broker—you have to get coverage through state-owned programs. In the other 46 states, you can purchase through licensed brokers or insurers, which often gives you more flexibility on price and coverage options.
Some states have threshold differences worth noting. Southern states often require coverage with as few as two employees, while others set the bar at five. California, New York, Pennsylvania, and Rhode Island are strict—one employee means you need coverage, full stop. Before you hire, check your state's Department of Labor or Workers' Compensation Board website for the exact requirements. Ignorance isn't a defense when the state comes knocking.
How to Get Started: Your Action Plan
First, verify your state's workers' comp requirements before you post that job listing. Don't wait until after you've made an offer. Next, contact a licensed insurance broker who specializes in small business coverage. Tell them you're a pet grooming business hiring your first employee, and ask about bundling workers' comp with EPLI. Many brokers can package these together, sometimes as part of a BOP, which can save you money.
Make sure you get your workers' comp classification code right from the start. Ask your broker to explain how your premium is calculated and what factors will affect your rate at annual renewal. Set up proper payroll reporting systems so your audits go smoothly. And seriously consider EPLI even if you think you'll never need it—the statistics say otherwise, and the cost is minimal compared to the risk.
Finally, once you have coverage in place, don't just file the certificates and forget about them. Review your policies annually. As your business grows and you add more employees, your needs will change. Your first employee is a milestone worth celebrating—just make sure you're protecting yourself, your employee, and your business with the right insurance foundation.
