If you have employees in Minnesota, you almost certainly need workers compensation insurance. It's one of the few business insurance coverages that Minnesota law requires — and unlike most states where the rules are murky, Minnesota's requirements are clear: virtually every employer must carry it. This guide covers what you need to know, whether you're just hiring your first employee or you're a growing business trying to manage your premium costs.
Is Workers Compensation Required in Minnesota?
Yes. Under Minnesota Statute §176.181, all employers with one or more employees are required to carry workers compensation insurance or be approved as a self-insurer. There are very few exceptions: domestic workers employed fewer than 26 hours per week, certain agricultural workers, independent contractors, and sole proprietors with no employees.
If you're a sole proprietor or single-member LLC with no employees, you're not required to carry it — but you might still want coverage for yourself, since workers comp would pay your medical bills and lost wages if you're injured on the job.
The penalty for non-compliance in Minnesota is significant: fines up to $1,000 per day, plus you become personally liable for any claims that would have been covered. A single serious workplace injury can easily exceed $100,000 in medical costs alone — that's a risk no business should take on.
What Does Workers Compensation Cover in Minnesota?
Workers compensation is a no-fault system. If an employee is injured on the job or develops a work-related illness, they receive benefits regardless of who was at fault — and in exchange, they generally can't sue you for the injury. Workers comp covers:
Medical expenses: All reasonable and necessary medical treatment related to the work injury — doctor visits, hospitalization, surgery, physical therapy, prescriptions, and medical equipment. There is no deductible or co-pay for the injured worker.
Wage replacement: If an injury prevents an employee from working, workers comp pays temporary total disability (TTD) benefits — typically about two-thirds of the employee's gross weekly wage, tax-free, up to a state maximum that adjusts annually. For 2025, Minnesota's maximum weekly compensation rate is approximately $1,300.
Permanent disability: For injuries that result in permanent impairment, workers comp provides additional compensation based on the severity and type of disability. Minnesota uses a scheduled and non-scheduled approach for different types of permanent injuries.
Vocational rehabilitation: If an injured employee can't return to their prior job, workers comp may provide retraining, job placement assistance, and related services to help them re-enter the workforce.
Death benefits: In the event of a fatal workplace accident, workers comp provides burial expenses and ongoing compensation to surviving dependents.
How Is Workers Comp Premium Calculated?
Your workers compensation premium is based on three primary factors:
Payroll: The base unit for workers comp is payroll. You pay a certain rate per $100 of payroll, so larger payrolls mean higher premiums. This is why it's critical to classify employees accurately — misclassifying higher-risk workers as lower-risk classifications is a common audit trigger.
Job classification codes: Each job function carries a different rate based on the statistical risk of injuries in that type of work. Office workers have very low rates (often $0.20–$0.50 per $100 of payroll). Roofing contractors might pay $15–$25 per $100. Construction, logging, and demolition are among the highest-risk classes.
Experience modification factor (EMR): Also called the "mod," this is a multiplier applied to your base premium based on your actual claims history compared to businesses of similar size and type. A mod of 1.0 is average. A 0.85 mod means you pay 15% less than average (good loss history). A 1.25 mod means you pay 25% more (worse than average loss history). Keeping your mod below 1.0 is one of the most impactful ways to reduce workers comp costs over time.
Your experience mod is calculated using three years of claims data (excluding the most recent year). Investing in workplace safety today won't immediately lower your premium, but it will significantly improve your mod — and your costs — three to five years from now.
How to Control Workers Comp Costs in Minnesota
Workers compensation is one of the larger ongoing insurance expenses for labor-intensive businesses. Here are proven strategies for controlling costs:
- Maintain a written safety program. OSHA-compliant safety programs, regular training, and documented safety procedures reduce injury frequency — and some insurers offer premium credits for documented safety practices.
- Establish a return-to-work program. Getting injured employees back to light-duty or modified work quickly reduces the duration of wage replacement claims, which is one of the biggest drivers of claim cost.
- Report claims promptly. Late-reported claims tend to cost more. Report all workplace injuries immediately and get employees to medical care quickly.
- Review your payroll classifications annually. If your business has changed — adding office staff, changing service mix — your job codes should be updated. Wrong codes can mean overpaying for years.
- Work with an independent broker who can shop your coverage annually. Workers comp rates vary meaningfully between carriers, and your best option at renewal can change year to year.
Getting Covered in Minnesota
Most businesses obtain workers compensation through the private market — licensed carriers like Travelers, Employers, Berkshire Hathaway, or many others. If your business can't get coverage privately (high-risk industry, poor claims history), the Minnesota Workers Compensation Assigned Risk Plan (administered by NCCI) is the state's insurer of last resort.
Dayton Insurance Agency works with multiple carriers and can shop your workers comp alongside your other business coverage. In many cases, bundling workers comp with your general liability or BOP through the same carrier earns a discount. Get a workers comp quote for your Minnesota business or call 651-243-0056 to talk through your options.