Alabama Workers' Compensation Requirements

A Complete Employer Guide

By U.S. TAX BAY – Experts in Payroll Registration, Compliance, and Business Setup Across the U.S.

✅ Is Workers' Compensation Insurance Required in Alabama?

Yes! Under Alabama law, every business with five (5) or more employees must carry workers’ compensation insurance. This protects employees injured on the job and shields employers from

costly lawsuits.

Important: Even part-time and seasonal workers count toward the employee total!

🧑‍💼 Workers Potentially Excluded from Alabama Workers' Comp Coverage

Certain employees may be excluded from mandatory coverage, such as:

• Domestic servants (housekeepers, nannies, etc.)

• Farm laborers

• Casual employees (temporary, occasional workers)

• Workers in businesses with fewer than five employees

• Licensed real estate brokers

• Product demonstrators

Employers should verify whether an exclusion applies before assuming coverage isn’t necessary.

🛒 How to Buy Workers' Compensation Insurance in Alabama

Businesses have a few options:

1️⃣ Private Insurance Carriers: Shop the open market for competitive rates.

2️⃣ Alabama Assigned Risk Pool: If your company is considered “high risk” and denied private

coverage, you can apply here.

3️⃣ Self-Insurance: Large businesses can apply to self-insure if they meet these requirements:

• Net worth of at least $5 million

• Positive net income for the past three (3) years

• An assets-to-liabilities ratio of 1:1 or better

🚨 Penalties for Not Having Workers' Compensation Coverage in Alabama

Failure to maintain the required insurance can result in severe penalties:

• $1,000 fine PER employee PER day of noncompliance

• Criminal charges, including potential jail time

• Court-ordered business shutdown until you secure insurance

Don’t risk your company! Get compliant before hiring employees.

⚰️ Alabama Workers' Compensation Death Benefits

In the tragic event of a worker’s death, eligible family members may receive:

• Up to 75% of the deceased employee’s average weekly wage (subject to state maximums)

• Benefits paid up to 500 weeks

• Funeral expense reimbursement, if the death occurs within four years of the work injury

📑 Need Help Setting Up Your Business Payroll and Compliance?

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✔️ Payroll Tax Registration

✔️ FEIN (Federal Employer Identification Number) Registration

✔️ Secretary of State (SOS) Business Registration

✔️ Workers' Compensation Registration Support

✔️ Full-Service Payroll Management

✔️ Unemployment Insurance Account Setup

✔️ Ongoing Compliance Services

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