Congratulations—you're ready to hire your first employee. It's a huge milestone for any roofing contractor. You've built up enough business that you can't handle all the jobs yourself anymore. But here's what catches most contractors off guard: the moment you bring on that first employee, your insurance needs change dramatically. What worked when you were a solo operation won't cut it anymore.
The biggest change? Workers' compensation insurance. In most states, it's not optional—it's the law. And for roofing contractors specifically, the requirements are often stricter than other trades because of the high-risk nature of the work. Miss this requirement, and you're looking at serious fines, potential lawsuits, and the very real possibility of losing your contractor's license.
When Workers' Compensation Becomes Mandatory
Here's the thing that surprises most roofing contractors: in the majority of states, you need workers' comp coverage from the moment you hire your first employee. Not when you hit five employees. Not when you reach a certain revenue threshold. Day one.
The exact trigger varies by state. California requires all active roofing contractors to carry workers' compensation insurance whether they have employees or not—even if you're working solo. Florida mandates coverage for construction businesses with just one employee. Texas is the outlier, not requiring coverage until you have three employees, though many general contractors and property owners will require you to have it anyway.
Why are roofing contractors held to a higher standard? Simple: roofing is dangerous work. Falls are one of the leading causes of construction injuries and deaths. States know this, so they classify roofers separately and often require stricter compliance, even for small crews. You can't fly under the radar on this one.
What Workers' Comp Actually Costs for Roofing Contractors
Let's talk numbers because this is where it gets real. Workers' compensation premiums for roofing contractors are calculated based on your payroll, and the rates reflect the risk level of your work. Roofing falls under classification codes 5551 or 5552, depending on your state, and these are among the highest-rated construction trades.
The average rate for roofing contractors ranges from about $9.90 to $15.25 per $100 of payroll nationally, but it varies widely by state. California roofing contractors can pay anywhere from $24 to $80 per $100 of payroll. State fund averages hover around $29.50 per $100. For perspective, if you're paying your new employee $50,000 a year and your rate is $15 per $100 of payroll, you're looking at roughly $7,500 in annual workers' comp premiums for that one worker.
Good news for Florida contractors: rates dropped 11.04 percent for classification code 5551 in 2026, with an overall 6.9 percent reduction in workers' comp rates effective January 1, 2026. Every little bit helps when you're budgeting for your first hire.
Your experience modification rate, or EMR, will also affect your premium. As a new employer, you'll start with a baseline EMR of 1.0. Keep your crew safe and avoid claims, and that number can drop over time, lowering your rates. Rack up injuries and claims, and your EMR goes up—along with your costs.
Why Payroll Classification Matters More Than You Think
Here's where contractors sometimes get themselves into trouble: not all employees on your payroll should be classified the same way. If your first hire is going up on roofs with you, they're classified under the roofing code. But if you hire an office administrator or estimator who never sets foot on a roof, they should be classified differently—often at a much lower rate.
Accurate classification isn't just about saving money—it's about compliance. During an audit, if your insurance carrier finds you've been misclassifying employees, you could face steep retroactive charges. Worse, if you're underreporting to save on premiums and an injury happens, your claim could be denied, leaving you personally liable for medical bills and lost wages.
Work with your insurance agent to make sure every employee is properly classified from day one. Keep detailed records of who does what. If someone splits time between office work and field work, document it. This protects you during audits and ensures you're paying the right premium for the actual risk.
Don't Overlook Employment Practices Liability Insurance
Workers' comp gets all the attention because it's legally required, but there's another coverage you should seriously consider when you hire your first employee: Employment Practices Liability Insurance, or EPLI. This protects you from claims like wrongful termination, discrimination, harassment, and retaliation.
You might be thinking, "I'm hiring one guy to help me shingle roofs—why would I need that?" Here's the reality: you're at risk from the moment you conduct your first interview. If you don't hire someone and they believe it was due to discrimination, you could face a claim. If you discipline your employee or eventually have to let them go, they could allege wrongful termination. Small businesses are actually more vulnerable to these claims because they typically don't have HR departments, employee handbooks, or formal policies in place.
The good news is EPLI is relatively affordable for small businesses. For companies with five to 20 employees, a standard $1 million policy typically costs between $1,500 and $2,500 annually, with many small businesses paying between $150 and $250 per month. You can often add it as an endorsement to your existing general liability policy or business owners policy rather than buying a separate policy.
How to Get Started: Your First-Hire Insurance Checklist
Before your new employee starts work, make sure you've covered these bases. First, verify your state's specific workers' compensation requirements. Don't assume—call your state's workers' comp board or check their website. Requirements change, and what your buddy in another state deals with might not apply to you.
Next, contact your insurance agent at least two weeks before your hire date. Getting workers' comp set up takes time, and you cannot have someone working without coverage in place. Your agent will need information about your new employee's role, estimated annual wages, and job duties to provide an accurate quote and proper classification.
Budget appropriately. Factor workers' comp premiums into your labor costs when bidding jobs. Many new contractors make the mistake of calculating only wages and payroll taxes, then getting blindsided by insurance costs. For roofing work, assume at least 10-15% of payroll will go toward workers' comp, potentially more depending on your state.
Consider EPLI coverage seriously, especially if you can add it inexpensively to your existing policy. Even if it's not required, the protection is worth the modest cost. One employment claim can easily cost tens of thousands in legal fees alone, even if you win.
Finally, keep meticulous payroll records. Your workers' comp premium will be audited annually based on actual payroll, and accurate records make that process smooth. They also protect you if there's ever a dispute about coverage or classification.
Hiring your first employee is exciting, but it comes with real responsibilities. Getting your insurance right from the start protects your new hire, your business, and your livelihood. Take the time to understand your state's requirements, work with a knowledgeable agent who understands construction insurance, and build these costs into your business model. Your future self—and your growing crew—will thank you.
