Workers’ compensation insurance pays for employees’ medical expenses and lost income when they experience a work-related injury or occupational illness. New Jersey requires all business owners with one or more employees to carry workers’ compensation, and the average cost across all industries is $1.42 per $100 of payroll.
What Are New Jersey Workers’ Compensation Requirements?
In New Jersey, all businesses with employees must obtain workers’ compensation insurance unless covered by a federal program. This includes corporations, limited liability companies (LLCs), and sole proprietors, as long as at least one person is paid to perform services for the business. The requirement takes effect for both full-time and part-time employees and lawfully or unlawfully employed workers.
Three types of employers in New Jersey who must maintain workers’ compensation insurance include:
- Corporations: Corporations must carry workers’ comp in New Jersey if any individual performs services for pay, including corporate officers
- Partnerships or LLCs: All partnerships and LLCs must carry workers’ comp in New Jersey, but partners and members may exclude themselves from coverage
- Sole proprietorship: Sole proprietors need workers’ compensation for their employees, but they do not have to include themselves in coverage. Some, however, may opt for self-employed workers’ comp coverage
Out-of-state employers might need workers’ comp coverage if they enter a contract of employment in New Jersey or perform any work in the state. The New Jersey Division of Workers’ Compensation provides a guide to workers’ compensation as well as additional information on its website.
Who Doesn’t Need Workers’ Compensation Insurance in New Jersey?
New Jersey law has few exemptions when it comes to workers’ compensation. The law states all employees must be covered except those covered by federal programs.
Where Can I Obtain Workers’ Compensation Insurance in New Jersey?
New Jersey employers who need workers’ compensation insurance can obtain coverage from one of the more than 400 private licensed insurers in the state. Certain businesses may also be approved to self-insure. Difficult-to-insure businesses or businesses having trouble finding coverage can use New Jersey’s assigned risk pool, which places these businesses with a carrier.
Top Workers’ Compensation Insurance Insurers in New Jersey
Broad, affordable workers’ comp coverage
Those who want a regional carrier focused on service
New ventures and startups looking for their first workers’ comp policies
Cash-strapped employers who want pay-as-you-go workers’ comp
Lowering future premiums with work safety programs
The Hartford has a team dedicated to small businesses, and the carrier has developed affordable products accounting for the unique risks small businesses face. They can also provide workers’ comp quotes in most industries they serve. A basic policy with the insurer includes six unique features that other carriers typically charge extra for, such as coverage for reasonable expenses that you incur in your defense and coverage for employees and volunteers even when not required by state law.
New Jersey Manufacturers
New Jersey Manufacturers is a regional carrier offering workers’ compensation insurance in New Jersey as well as Connecticut, Delaware, Maryland, New York, and Pennsylvania. A top commercial insurance company, rated an A+ (Superior) by A.M. Best for its strong financial stability, New Jersey Manufacturers has been the leading workers’ comp insurance provider in the state for more than 70 years. New Jersey Manufacturers is also recognized for outstanding claims satisfaction.
AmTrust Financial is a bit of a newcomer in the small insurance space but has grown to be one of the largest commercial insurers in only 20 years. The company is an ideal insurer for new ventures in New Jersey. Carriers typically balk at covering startups or new businesses because it’s difficult to predict the chance of paying claims, but AmTrust caters to these situations.
AP Intego, a leading commercial insurance broker, is a great choice for New Jersey employers seeking a streamlined platform for their workers’ comp and payroll services. The company uses advanced technology to offer a pay-as-you-go workers’ compensation plan that integrates with payroll services, such as QuickBooks or Square, to deduct the appropriate premium every month automatically.
Employers, a national carrier, is unique because it only offers workers’ compensation insurance. With just one type of coverage offered, it has a deep understanding of workers’ comp risks to draw on when writing policies. Employers helps business owners save money by performing a hazard analysis, offering management and supervisory safety programs, and providing employee safety presentations and training for no extra cost.
New Jersey Workers’ Compensation Self-insurance Requirements
Approved businesses in New Jersey may self-insure by submitting an application to the Commissioner of the Department of Banking and Insurance. Approval is based upon the financial ability of the employer to meet state requirements. A self-insured employer has the option of handling its own workers’ comp claims or contracting with a third-party administrator.
New Jersey Workers’ Compensation Rates
New Jersey workers’ compensation insurance costs are determined by three main factors: work risk, loss history, and payroll. The average New Jersey employer pays $1.42 per $100 of payroll, according to the most recent data from the National Association of Social Insurance, but premiums typically range between 72 cents and $19.72 per $100.
To determine New Jersey workers’ compensation premiums, insurance companies begin with a business’ classification code. Each code, developed by the Commissioner of the Department of Banking and Insurance, identifies how risky the industry is and has a rate based on that risk. This rate is multiplied by total payroll divided by $100 and an experience modifier (EMR). An EMR is a numeric representation of the company’s claim experience. Generally, employers with less severe accidents than other similar businesses pay less in premiums.
The basic formula for determining workers’ comp premiums is:
(Payroll / $100) x class code rate x EMR = Premium
Sample New Jersey Workers’ Compensation Rates by Class Code
Industry Class Code
5183 Plumbing Contractors
7225 Towing Company
8742 Sales Professional
8810 Clerical - Office
8829 Nursing Home
9014 Janitorial Service
9053 Fitness Center
New Jersey Workers’ Compensation Insurance Cost Example
A business’s class code is based on the risk inherent in its employee’s work. The riskier the work, the higher an employer’s workers’ comp premium is. For example, in New Jersey, a fitness center (class code 9053) has a low rate of $1.51 per $100 of payroll. A fitness center is a reasonably safe line of work.
But a business with greater risks, such as a plumbing contractor (class code 5183), has a rate of $5.86 per $100. Typically, contractor businesses face a higher risk of injury, so employees in these industries generate higher premiums. However, two contractors with similar payrolls and who take on the same type of jobs may still have different rates because of their claims history.
For example, a plumber with $100,000 of payroll per year and an EMR of 0.9 has an estimated premium of $5,274:
($100,000 / $100) x $5.86 x 0.9 = $5,274
While a plumber with the same payroll but an EMR of 1.1 pays more:
($100,000 / $100) x $5.86 x 1.1 = $6,446
New Jersey Workers’ Comp Premium Discounts
New Jersey employers with a workers’ comp policy premium greater than $5,000 are eligible to receive automatic premium discounts. Discounts are given as a percentage of gross premium, so a larger premium generally generates a higher discount. Insurance carriers are required to apply discounts based automatically on the current New Jersey premium discount formula. Discounts are not available for state fund policies.
New Jersey Workers’ Compensation Audit Requirements
Because a business’s payroll and staff can change at any time during the life of a workers’ compensation policy, most insurance carriers require a premium audit at the end of the policy period. Some insurers may also audit a business if it closes or drops its coverage before the end of the policy. Employers who hire during the policy term may end up owing an additional premium after an audit.
New Jersey small business owners can prepare for a premium audit by gathering relevant documents, including:
- Payroll journal
- Tax reports, both state and federal
- Employee records, including subcontractors and independent contractors
- Overtime payroll records
- Job contracts and invoices
- Employee time cards and job descriptions
- Contract labor agreements
- Bank records
If you feel you’ve been treated unfairly during an audit, you can reach out to your insurance carrier.
What New Jersey Workers’ Compensation Insurance Covers
Just as employer requirements vary by state, so do the coverage details. In New Jersey, workers’ compensation policies provide medical treatment and wage replacement for work-related injuries. Injured workers receive income replacement of up to 70% of their gross weekly wage if they miss more than seven days of work. Death benefits and funeral expenses are also available for workplace injuries resulting in the death of an employee.
New Jersey workers’ compensation insurance typically covers:
- Medical expenses: Covers the cost of reasonable medical treatments and care as well as physical and occupational therapy; insurers and/or employers have the right to designate medical providers
- Temporary disability benefits: Provides up to 400 weeks of 70% to 75% of the injured workers’ average weekly wage when they are unable to work to replace lost wages
- Permanent disability benefits: Compensates employees for the continued effects of an injury, initially up to 450 weeks
- Funeral expenses: Covers up to $3,500 in burial costs of an employee who died as a result of a workplace injury or illness
- Death benefit: Pays surviving dependents based on the loss of income from the deceased employee of up to 70% of the average weekly wage
For employers, workers’ compensation insurance in New Jersey covers financial liabilities for work-related injuries and illnesses as well as legal representation if an employee files a lawsuit. An injured employee receives benefits regardless of who was at fault in an accident or injury. Benefits may double for minors hired in violation of child labor laws.
Note: New Jersey enacted a bill to protect essential workers who contract COVID-19 through the course of work. These essential workers are covered fully by workers’ compensation insurance if they become ill with COVID-19 from work-related duties.
New Jersey Workers’ Compensation Coverage Example
John works in a warehouse as a forklift operator. A forklift John is driving rolls over, pinning him beneath. He is rushed to the hospital in critical condition, where he later dies of his injuries. His employer has two days to notify the New Jersey Department of Labor and Workforce Development. All of John’s medical bills are paid for by his employer’s insurance carrier.
Upon his death, his wife receives $3,500 to help pay for the funeral. John had no children with his wife, so his wife is his only dependent. She receives the minimum death benefit payment, which is 50% of John’s average weekly wage.
What Are the Penalties for Not Having Workers’ Compensation Insurance in New Jersey?
Penalties in New Jersey can be steep for failure to provide workers’ compensation coverage, even without a workplace injury. Failing to insure employees is deemed a criminal offense with penalties of up to $5,000 for the first 10 days and another $5,000 for each additional 10-day period without required workers’ comp coverage.
If there’s a case involving workplace injuries without the required coverage, the employer and its corporate officers can be held liable. Penalties assessed for failure to insure are not dischargeable in bankruptcy.
How Do I File a Workers’ Comp Claim in New Jersey?
Employers need to report workplace injuries or occupational illnesses to their workers’ comp carriers as soon as possible. Unlike some states, notice from your employee does not need to be in writing. If your employee fails to report their injury within 90 days, they may lose their right to collect benefits.
Once notified, the insurance company completes a First Report of Injury form and submits it to the New Jersey Division of Workers’ Compensation to begin the claim. The insurer also notifies the employee whether their claim qualifies for benefits. If the claim is approved, the employee begins receiving disability benefits. If their claim is denied, the employee may appeal the decision.
State law in New Jersey only prohibits the firing of an employee in retaliation for filing a workers’ comp claim or testifying at a hearing. If you terminate an employee because of their condition, they may be able to file a claim for violation of the Americans with Disabilities Act (ADA).
New Jersey Workers’ Compensation Insurance Deadlines
New Jersey business owners should obtain workers’ compensation insurance as soon as they hire an employee, whether that person works full- or part-time, to ensure they’re covered adequately from the start. Gaps in coverage may mean your carrier can deny a claim, or you might face a penalty for not having adequate coverage.
Other key deadlines for New Jersey workers’ compensation insurance include:
- Workers must be unable to work for seven days, including weekends and holidays, before they are eligible for temporary disability benefits
- Workers should notify their employer as soon as possible about an injury or accident to receive compensation—notice does not have to be in writing
- Workers should make a request for medical treatment to their employer as soon as possible
- Workers have two years from the date of injury to petition the state for workers’ comp benefits
- Employers should notify their carrier immediately to file a First Report of Injury or Illness form with the state
- The insurance carrier is required to submit the Subsequent (Final) Report of Injury form within 26 weeks after the employee returns to work or reaches maximum medical improvement
Most of these deadlines apply to employees, but it’s smart for business owners to know what to expect. Talk to your insurance carrier to learn about deadlines you must follow to comply with the requirements of your specific workers’ compensation policy.
New Jersey Workers’ Comp Resources
- Contact Information
- Department of Labor and Workforce Development
P.O. Box 381
Trenton, NJ 08625
- Department of Labor and Workforce Development
- Key Forms
- Useful Links
Workers’ compensation insurance is a requirement for all businesses with at least one employee in New Jersey. It’s expensive, but it protects your business from liability by covering expenses for costly workplace injuries or illnesses. Keep your workers’ comp costs low by taking preventive measures to ensure a safe work environment.
The Hartford can help New Jersey employers find affordable workers’ compensation insurance. Its application process takes minutes to complete, and it offers discounts for buying multiple commercial policies.