Every state has enacted workers' compensation laws to protect employees against loss of income and for medical payments due to a work-related injury, accident, illness, or disease. In the vast majority of states, workers' compensation coverage is mandatory. The discussion that follows will give you a feel for what workers' compensation laws will require of you. Before you set up your workers' compensation program, however, you should discuss it with your attorney to make sure that you're complying with all of the applicable laws.

Do the laws apply to you? In most states, all employers who have at least one employee are covered. While some states exempt very small employers, they don't all have the same definition of what constitutes a small employer. The most common exemption is for employers with fewer than three employees, but some provide the exemption to employers with fewer than four and others to employers with fewer than five. Of course, even if you're exempt, you can generally choose to participate in the state program.

Click on your state on the map below to find out who is exempt from your state's workers' compensation laws. The information provided is the number of employees that you must have for the state laws to apply to you. For example, "All employers with five or more employees" means that you are exempt from the laws unless you have five or more employees.

Advantages and disadvantages. There are both advantages and disadvantages to having a state-mandated workers' compensation system or to voluntarily participating in the system even if not legally required. The advantages to you are:

• that your liability for on-the-job injuries is limited to the remedies available under the workers' compensation system; you can't be sued for everything you own
• that the types of benefits you have to pay to employees are limited to those available under the laws
• that your disability planning is made easier because the costs are predictable

The disadvantages to you are:

• that your premiums may be high, depending upon your accident record
• that filing requirements increase your administrative burdens
• that spurious claims may needlessly take up your time

If you're interested in exploring the world of workers' compensation benefits, here's a list of subjects that might be of interest:

• benefits commonly provided under state laws
• what you should do when accidents happen
• what your employees should do when accidents happen
• tax and salary implications of benefits
• other benefit payments that may interact with workers' compensation