Workers' comp for e-commerce businesses: what you need and what it costs
Workers' comp pays an employee's medical bills and lost wages after a work injury, and an online seller needs it once someone works for the business; the starting point differs by state. Your price comes from payroll, a base price per $100, your insurer's expenses and your claims record. Staff who pack your own goods are usually rated with the store, not as a warehouse.
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- An owner working alone is often outside the requirement, and a few packers usually are not. Whether a contractor or temp worker counts depends on your state; check your state's page and ask your agent.
- The rating bureau's base price is not what you pay. Your insurer's expenses and your own claims record are added.
- Staff who pack your own goods are generally classed with the store. Office-only staff are generally classed separately, so keep their payroll apart.
Do I need workers' comp if I have no employees?
Often not, if you work alone. The requirement attaches to people who work for you, and several states leave an owner working alone out. It starts when someone else works for you, even a few hours a week.
| Who works for you | What generally happens | What to do |
|---|---|---|
| Only you | No policy is usually required for you. Some states let an owner opt in. | Ask about opting in. |
| A few packers, part-time or seasonal | They are generally treated as employees, so a policy is usually needed once your state's starting point is met. | Get a quote before the first shift. |
| Contractors, such as a freelance packer | Depends on your state's test. | Read your state's page and ask for their proof of coverage. |
| A relative who helps | Counts in some states. | Check your state's page. |
Workers' compWorkers' Compensation Insurance that pays medical bills and lost wages when an employee is hurt or sick because of work. Insurers call it workers' compensation. more → is a separate policy from your liability and property coverage. Whether someone counts as your employee depends on your state's test, and your state's page has it. Our guide to what changes when you hire an employee covers the first hire.
How is the price of workers' comp built?
Payroll in each class, a base price for that class, your insurer's own expenses, and a multiplier from your claims record once you are large enough. The base price is not what you pay.
The rating bureau's base price is the average injury cost per $100 of payroll in a class. Each insurer adds its own expenses and profit. Larger accounts also get an experience modification factorExperience Modification Factor (E-Mod) A number, with 1.0 as average, that raises or lowers your workers' compensation price based on your claims compared with similar businesses. Insurers call it the experience modification factor. more →, a number built from your own claims: above 1.00 raises the premium and below 1.00 lowers it. In Washington the price is per hour worked instead of per $100 of payroll. Picture a seller whose packers earn $240K a year, with an example base price of $2.00 and an insurer that adds an example 25% for its expenses.
| What happens | Amount |
|---|---|
| Your packers' payroll is | $240K |
| Divided into $100 units ($240K ÷ $100) | 2,400 |
| The bureau's base price per unit, an example figure | $2.00 |
| Your insurer adds an example 25% for its expenses ($2.00 × 1.25) | $2.50 |
| The premium before any modifier (2,400 × $2.50) | $6K |
| With an average claims modifier of 1.00, you pay ($6K × 1.00) | $6K |
| With a modifier of 1.20, more claims than average ($6K × 1.20) | $7.2K |
| With a modifier of 0.85, fewer claims than average ($6K × 0.85) | $5.1K |
Illustration only, with round numbers, an example base price and an example expense figure. It is not a statement of what any policy pays; your own policy wording governs.
So the answer to "what does it cost" is a formula, not one number. Gather payroll by job before you ask for a quote; what to prepare for an e-commerce insurance quote lists the rest.
How are my packers and office staff classed?
Staff who pack and ship your own goods are generally classed with the store, not as a warehouse business. Office-only staff are classed separately, usually at a lower price.
A warehouse class is meant for businesses that store goods for others and do not own them, and a seller's own warehouse is part of its business. (Source: National Council on Compensation Insurance) Washington's rule says the same: its warehouse class does not cover a business storing its own goods. (Source: Washington Administrative Code 296-17A-2102)
Warehouse work records more injuries than the online-store side of the business: 4.8 cases per 100 full-time workers in 2024 for warehousing, against 1.2 for online and mail-order stores. (Source: Bureau of Labor Statistics) So tell your agent exactly who packs and who sits at a desk, and keep payroll for each group separate.
What changes by state?
The starting point, the owner rules and the price all differ. Each state's page has the full law; the table shows only what matters to an online seller.
| State | When it starts | What is different here | Cost standing |
|---|---|---|---|
| Kansas | Yearly payroll over $20K | A sole owner is out unless they opt in | Rank 35 |
| Missouri | Five employees, or one in construction; relatives count | A corporation with only its one or two owners can withdraw | Rank 16 |
| New York | One employee | Officers are covered unless a form leaves them out; see below | Rank 3; 182% of the study median |
| Pennsylvania | From the first employee | Own rating bureau; officers are covered unless two forms opt them out | Rank 21 |
| Massachusetts | Even one employee; relatives count | Own rating bureau; no policy can mean a stop-work order | Rank 31 |
| Louisiana | Any employee; no minimum number | Owners opt out only in writing with the insurer | Rank 9 |
| Maryland | From the first covered employee | Sole owners are out unless they opt in | Rank 37 |
| Washington | Every employer with covered workers | State fund only; priced per hour worked | Rank 12 |
Cost standing is the state's rank in Oregon's 2024 premium rate study, where rank 1 is the most expensive. It reflects the study's mix of businesses, not online sellers. (Source: Oregon Department of Consumer and Business Services)
In New York, a 2003 bulletin from the state's rating bureau treats sellers that handle and ship goods ordered online as wholesale stores, not retail ones. Ask your agent whether that still applies to you. (Source: New York Compensation Insurance Rating Board) The index of workers' comp laws by state has the full rules, and e-commerce insurance requirements by state compares them with auto minimums.
What happens at the year-end payroll check if I hire packers for peak season?
Your starting premium is an estimate. After the year ends, the insurer checks your real payroll and bills or refunds the difference.
That check is called a premium audit. Seasonal packers who were not in your estimate show up there, so a busy holiday season can add to the bill and a quiet year can bring money back. Keep payroll by job all year; what a premium audit is lists what the auditor asks for. More on the coverage itself is on the workers' comp coverage page.
Common questions about workers' comp for online sellers
No. The package that bundles liability and property coverage does not include workers' comp. It is a separate policy with its own renewal and year-end check.
It covers employees. A contractor's status depends on your state's test, and in some states you can be liable if an uninsured contractor's worker is hurt, so ask for proof of their coverage.
Generally yes, if they are your employees and your state's starting point is met. Put them in your payroll estimate so the year-end check does not surprise you.
Check your packers' payroll and classes
Send us your payroll by job and the classes on your current policy, and we will compare them with how your business actually runs.