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If you’re a California employer looking to protect both your business and your team, you’re in the right place. At Beyond, we provide the essential information you need to understand how workers’ compensation works and how to stay compliant.
Workers’ compensation insurance helps protect both employees and businesses from financial loss due to workplace-related injuries or illnesses. For covered employees, it provides:
Medical care
Wage replacement
These benefits apply only to injuries or illnesses that occur during and because of work duties. This coverage isn’t just important – it’s essential.
Yes. California law mandates that every employer must carry workers’ compensation insurance – even if you have only one employee. This includes part-time workers and employees who are hired remotely but regularly work in California, regardless of where your business is based.
These requirements are outlined in California Labor Code Section 3700.
California generally requires workers’ compensation coverage for employees, but the Labor Code includes limited, specific exclusions. For example, certain household workers employed by the owner or occupant of a residential dwelling may be excluded if the employment was (or was contracted to be) for less than 52 hours in the prior 90 days or for wages of no more than $100 in the prior 90 days. The Labor Code also includes exclusions for certain unpaid volunteers for public agencies or private nonprofit organizations (where there is no remuneration beyond incidental expenses). Because exemptions are technical and fact-specific, employers should confirm applicability with a licensed broker or the Division of Workers’ Compensation.
A sole proprietor with no employees is not required to carry workers’ compensation coverage for themselves in California. However, if a sole proprietor wants workers’ comp coverage for personal protection, it must be clearly stated in the policy or added by endorsement. Some sole proprietors may also consider health, life, or disability income insurance as alternatives, depending on their situation.
In California, workers’ compensation benefits can include medical care, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits, and death benefits (when applicable). These benefits generally apply to injuries or illnesses that arise out of and in the course of employment.
Failing to maintain required workers’ compensation coverage in California can trigger criminal and civil enforcement. California guidance notes that failure to secure coverage is a misdemeanor that may be punishable by a fine of at least $10,000 and up to one year in county jail (or both). If the Labor Commissioner determines an employer is operating without coverage, a stop order may be issued prohibiting the use of employee labor until coverage is obtained; failing to observe a stop order is a misdemeanor punishable by up to 60 days in county jail, a fine of up to $10,000, or both. Civil penalties may also apply, including the greater of (1) twice the premium that would have been owed during the uninsured period or (2) $1,500 per employee employed during the uninsured period. Additionally, in certain cases involving a workers’ compensation claim, an uninsured employer may be assessed $10,000 per employee on payroll at the time of injury if the claim is found compensable, or $2,000 per employee if non-compensable, up to a maximum of $100,000.
Employers generally obtain workers’ compensation coverage through a licensed insurance company or through the State Compensation Insurance Fund (State Fund). Employers may also have the option to self-insure (with state approval). A licensed broker can help compare options and explain eligibility, including how State Fund operates as an insurer of last resort when private carriers are unwilling to offer coverage.
In a traditional plan, premiums are based on an estimated total of your company’s annual payroll. Here’s how it typically works:
The insurer calculates your premium upfront
You pay a lump sum, followed by monthly or quarterly installments
At the end of the year, the insurer conducts a payroll audit to determine the actual premium
If you overpaid, you get a refund — if you underpaid, you’ll be billed the difference
While this is a familiar model, it often requires large upfront payments and may lead to surprises at year-end.
With pay-as-you-go workers’ comp, your premiums are calculated each payroll cycle, meaning you only pay for the coverage you actually need — no guesswork.
Benefits include:
Lower upfront payments (premiums calculated as payroll runs)
More accurate premium funding throughout the year (which can reduce audit surprises)
Easier premium true-ups when payroll changes
Integration with many payroll systems (depending on provider)
It’s no surprise this model is gaining popularity with businesses of all sizes. For more details, check out our pay-as-you-go guide.
Need help navigating workers’ compensation compliance in California? These resources can guide you:
California Labor Code §3700 – Workers’ Compensation and Insurance requirements
At Beyond, we offer more than just guidance – we provide smart tools to make your job easier. Try our free California payroll calculator to quickly determine accurate withholdings and deductions for any employee payment.
In California, carrying workers’ compensation is not just a legal obligation – it’s a safeguard for your business and a sign of care for your team.
Employees are covered if they miss work due to illness or injury
Employers are protected from costly lawsuits
Pay-as-you-go options help you stay compliant without disrupting your cash flow
Need help choosing a plan that fits your business? The Beyond team is here to support you every step of the way.
