Florida Workers' Compensation: Payroll Requirements for Employers

Workers' compensation insurance is one of the first compliance obligations Florida employers must address — and the rules are more nuanced than most people realize. The coverage threshold depends on your industry, the premium depends on your payroll and classification codes, and the penalties for non-compliance can shut your business down. This guide covers everything Florida employers need to know about workers' comp as it relates to payroll: who must carry coverage, how premiums are calculated, what ghost policies are, and what happens if you get caught without coverage.

Who Must Carry Workers' Compensation Coverage

Florida law requires most employers to carry workers' compensation insurance, but the specific trigger depends on your industry. The Florida Division of Workers' Compensation, part of the Department of Financial Services, administers the program and actively investigates employers for compliance.

Unlike some states that apply a single employee-count threshold across all industries, Florida uses a tiered system. Construction employers face the strictest requirements, while agricultural employers have the most lenient thresholds. Understanding which category your business falls into is the first step.

Coverage Thresholds by Industry

The following table summarizes when workers' compensation insurance is required in Florida based on your industry classification:

Ghost Policies

A ghost policy is a workers' compensation policy that covers the business owner only, with no employees listed on the policy. The name comes from the fact that there are essentially no "bodies" on the policy — it is coverage in name only, for the purpose of proving to general contractors and project owners that you have a workers' comp policy in place.

Ghost policies are extremely common in Florida's construction industry. Here is why they exist and how they work:

• General contractors are required to verify that every subcontractor has workers' comp coverage. If a sub does not have coverage, the GC's own policy must cover that sub's employees — which increases the GC's premium.
• Sole proprietors and subcontractors with no employees still need to show proof of coverage to get hired. A ghost policy provides that proof.
• The policy typically costs between $750 and $2,500 per year, depending on the carrier and the classification code.
• The owner on a ghost policy is covered by the policy (meaning they can file a claim if injured), but since there is no payroll to base the premium on, the cost is minimal.

How Workers' Comp Premiums Are Calculated

Workers' compensation premiums in Florida are directly tied to your payroll. This is why workers' comp is a payroll issue, not just an insurance issue. The basic formula is:

Example: Suppose you have $500,000 in annual payroll for employees classified under NCCI code 8810 (Clerical Office Employees), which carries a rate of approximately $0.16 per $100 of payroll. Your premium for that classification would be:

($500,000 ÷ 100) × $0.16 = $800 per year

Now suppose you also have $200,000 in payroll for employees classified under NCCI code 5645 (Carpentry), which might carry a rate of $7.50 per $100 of payroll:

($200,000 ÷ 100) × $7.50 = $15,000 per year

Your total estimated premium would be $15,800 before any experience modification adjustments. Notice how the construction payroll, even though it is less than half of the clerical payroll, drives the vast majority of the premium. This is why accurate classification of employees is critical — misclassifying a clerical worker under a construction code (or vice versa) can dramatically over- or under-state your premium.

Classification Codes (NCCI Class Codes)

Florida uses the National Council on Compensation Insurance (NCCI) classification system. Every type of work is assigned a four-digit class code, and each code has a corresponding rate that reflects the historical risk of injury for that type of work.

Some common NCCI class codes and their relative risk levels:

Your insurance carrier assigns class codes based on the actual duties your employees perform, not their job titles. An employee with the title "Project Manager" who spends 50% of their time on construction sites may be classified under a construction code rather than a clerical code. The insurer will verify this during your annual payroll audit.

Experience Modification Rate (E-Mod)

The Experience Modification Rate (EMR), also called the e-mod, is a multiplier that adjusts your workers' comp premium based on your company's claims history relative to other businesses in your industry and size range.

• An e-mod of 1.00 means your claims experience is exactly average for your classification.
• An e-mod below 1.00 (e.g., 0.85) means you have fewer or less severe claims than average, and your premium is reduced by 15%.
• An e-mod above 1.00 (e.g., 1.25) means you have more or more severe claims than average, and your premium is increased by 25%.

The e-mod is calculated by NCCI using your claims data from the three most recent completed policy years (excluding the current year). New businesses without enough claims history will typically be assigned an e-mod of 1.00.

Example with e-mod applied: Using the $15,800 base premium from above, if your e-mod is 0.80:

$15,800 × 0.80 = $12,640 adjusted premium

If your e-mod were 1.30 due to a history of claims:

$15,800 × 1.30 = $20,540 adjusted premium

Exemptions for Officers, Sole Proprietors, and Partners

Florida allows certain business owners to exempt themselves from workers' compensation coverage. The rules differ based on your industry and business structure:

Construction Industry

• Corporate officers can exempt themselves from coverage by filing a Notice of Election to Be Exempt with the Florida Division of Workers' Compensation. Up to 3 officers per corporation may be exempt.
• Each exempt officer must own at least 10% of the corporation's stock.
• The exemption is not automatic — you must apply and receive approval. The exemption is valid for 2 years and must be renewed.

Non-Construction Industry

• Corporate officers can exempt themselves, and there is no limit on the number of officers who may be exempt (unlike the 3-officer limit in construction).
• Each exempt officer must be listed on the corporate filing with the Florida Division of Corporations.

Sole Proprietors and Partners

• Sole proprietors and partners are not automatically included in a workers' compensation policy in Florida. They are not considered "employees" under the workers' comp statute unless they affirmatively elect coverage.
• Sole proprietors and partners can elect to be covered by notifying their insurance carrier in writing.
• This election makes sense for owners who perform physical or hazardous work and want the protection of workers' comp benefits if injured.

Penalties for Non-Compliance

Florida takes workers' compensation compliance seriously, and the penalties for operating without required coverage are severe:

Stop-Work Orders

The Florida Division of Workers' Compensation can issue a stop-work order that immediately shuts down all business operations until the employer obtains coverage and pays all associated penalties. A stop-work order means your employees cannot work, your projects halt, and your revenue stops — effective immediately.

Financial Penalties

• $1,000 per day for each day the employer operated without required coverage, or
• 2 times the amount of premium the employer would have paid during the period of non-compliance, whichever is greater

These penalties are cumulative. An employer who operates without coverage for 6 months could face a penalty of $180,000 (180 days × $1,000) or double the premium that should have been paid, whichever amount is higher.

Proof of Coverage

Florida employers are required to post notice of their workers' compensation coverage in a conspicuous location at the workplace. Employers must also provide coverage information to employees. Failure to post the required notice is a separate violation.

How to Get Workers' Compensation Coverage

Florida employers have several options for obtaining workers' compensation insurance:

1. Private Insurance Carriers

Most Florida employers purchase workers' comp through a licensed private insurance carrier. You can work with an insurance agent or broker who specializes in commercial insurance or workers' compensation. The agent will collect information about your business — including your payroll by classification, number of employees, and claims history — and shop the market for the best rate.

2. State of Florida Self-Insurance Program

Larger employers may qualify for the Florida self-insurance program, which allows them to self-fund their workers' comp claims rather than purchasing a traditional insurance policy. To qualify, employers must demonstrate sufficient financial resources and post a security deposit. This option is typically only viable for businesses with substantial payroll and a strong claims history.

3. Professional Employer Organizations (PEOs)

Small businesses can also obtain workers' comp coverage through a PEO (also known as an employee leasing company). The PEO becomes the employer of record for insurance purposes and provides coverage under its master policy. This can be particularly cost-effective for small businesses in high-risk classifications that have difficulty finding affordable standalone coverage.

Annual Payroll Audits

Every workers' compensation policy in Florida is subject to an annual payroll audit by the insurer. Here is how it works and why it matters for your payroll processes:

How the Audit Works

1. At the beginning of your policy period, you provide an estimated payroll for each classification code. Your premium is calculated based on this estimate.
2. At the end of the policy period (or after cancellation), the insurer conducts an audit to compare your actual payroll to the estimate.
3. If your actual payroll was higher than estimated, you owe an additional premium. If actual payroll was lower, you receive a credit or refund.

What Auditors Review

• Payroll records: Quarterly wage reports, payroll journals, and tax filings (941s, state unemployment reports)
• Employee classifications: Job descriptions, duties performed, and time allocation across different types of work
• Subcontractor records: Certificates of insurance from every subcontractor. Uninsured subcontractor payments may be added to your payroll for premium calculation.
• Officer payroll: Whether officers are included or exempt, and the payroll amounts for included officers
• Cash payments and 1099 workers: Payments to workers without proof of their own coverage may be treated as your payroll

Tips for a Smooth Audit

• Keep your payroll records organized by classification code throughout the year — do not wait until audit time to sort them out.
• Maintain a file of current certificates of insurance for every subcontractor.
• If you have employees who perform work across multiple classifications, keep time records documenting the split.
• Notify your insurer promptly if your payroll increases or decreases significantly mid-year. Waiting until the audit to reveal a large payroll increase can result in a large audit bill that strains your cash flow.
• Review the auditor's findings before signing. Errors in classification or payroll amounts are common and can be corrected if caught during the audit.

Frequently Asked Questions

Do I need workers' comp if I only have part-time employees?

Yes. Florida does not distinguish between full-time and part-time employees when determining workers' compensation requirements. If you meet the employee threshold for your industry (1 for construction, 4 for non-construction, 6 regular or 12 seasonal for agriculture), you need coverage regardless of whether employees are full-time, part-time, or temporary.

Are independent contractors covered under my workers' comp policy?

Legitimate independent contractors (1099 workers) are not your employees and are not covered under your policy. However, if the Florida Division of Workers' Compensation determines that a worker you classified as a contractor is actually an employee, you can be held liable for coverage — and penalized for the period of non-compliance. During your annual payroll audit, payments to uninsured subcontractors and 1099 workers may also be added to your payroll for premium purposes.

What is the difference between a ghost policy and a regular workers' comp policy?

A ghost policy is a minimal workers' comp policy that covers only the business owner, with no employees on the policy. It is used primarily by sole proprietors and subcontractors in the construction industry to satisfy the proof-of-coverage requirements that general contractors demand. A regular policy covers actual employees, with premiums based on their payroll and classification codes. A ghost policy typically costs $750 to $2,500 per year; a regular policy costs significantly more, depending on payroll and classifications.

Can I be personally liable if my business does not carry workers' comp?

Yes. If an employee is injured and your business does not have the required workers' comp coverage, you lose the protections that workers' comp provides to employers — namely, the bar against employee lawsuits for workplace injuries. The injured employee can sue you directly in civil court for the full amount of their damages, including pain and suffering, which is not available under workers' comp. On top of that, you face the stop-work order and financial penalties described above.

How often do I need to renew my workers' comp policy?

Most workers' compensation policies are written for a one-year term and must be renewed annually. Your insurer will typically begin the renewal process 30 to 60 days before expiration. Your renewal premium will be based on updated payroll estimates and your current experience modification rate. Do not let your policy lapse — even a single day without coverage can trigger a stop-work order.

What payroll is included in the workers' comp premium calculation?

Generally, workers' comp payroll includes gross wages, salaries, commissions, bonuses, vacation pay, holiday pay, sick pay, and overtime pay (at straight-time value only — the overtime premium portion is excluded). Tips reported to the employer are also included. Employer contributions to retirement plans, group health insurance premiums, and expense reimbursements are generally excluded.