Workers' Compensation in Texas: What Every Employer Needs to Know

The Texas Workers' Comp Exception

In every other U.S. state, workers' compensation insurance is mandatory for employers. Texas stands alone as the only state that does not require most private employers to carry it. This has created a complex landscape that every Texas employer needs to understand — because the consequences of getting it wrong can be devastating.

In Texas, employers who choose to carry workers' comp are called subscribers. Those who do not carry it are called non-subscribers. Each status comes with significantly different legal rights, obligations, and risks.

What Workers' Compensation Covers

Workers' compensation provides coverage when an employee is injured or becomes ill as a direct result of their job. It covers:

• Medical treatment: Emergency care, hospital stays, surgery, medications, and ongoing physical therapy
• Lost wages: Typically 70–75% of the employee's average weekly wage while they are unable to work
• Permanent disability benefits: For injuries that result in lasting impairment
• Death benefits: Paid to the surviving spouse and dependent children if an employee dies from a work-related injury or illness
• Burial expenses: A contribution toward funeral costs

Workers' comp also includes employer's liability coverage, which protects your business if an injured employee (or their family) sues you for damages beyond what workers' comp provides.

Subscriber vs. Non-Subscriber: What Is the Real Difference?

If You Are a Subscriber (You Have Workers' Comp)

• Injured employees receive guaranteed benefits regardless of who was at fault
• Employees generally give up the right to sue you in civil court for most work injuries (called the "exclusive remedy" rule)
• You are protected from lawsuits alleging negligence for most workplace injuries
• Your liability exposure is capped and predictable

If You Are a Non-Subscriber (No Workers' Comp)

• Injured employees CAN sue you in civil court
• You lose the ability to use contributory negligence as a defense (you cannot argue the employee's own actions contributed to the injury)
• You cannot argue the employee assumed the risk of the job
• You cannot claim a co-employee's negligence caused the accident
• Jury awards in non-subscriber cases can be catastrophic — there is no cap on damages
• You must notify the Texas Department of Insurance if you are a non-subscriber

In short, non-subscriber status removes almost all of your legal defenses while simultaneously exposing you to uncapped civil liability. The potential downside far outweighs the premium savings for most businesses.

When Workers' Comp IS Required in Texas

While most private employers have a choice, workers' compensation IS required in Texas for:

• Employers who have state government contracts
• Construction companies working on state-funded public works projects
• Certain employers under federal law (railroads, maritime workers)

Additionally, many private-sector clients and general contractors require subcontractors to carry workers' comp as a condition of any contract — even for private jobs. If you work in construction, this is a near-universal expectation.

How Much Does Workers' Comp Cost in Texas?

Workers' comp premiums in Texas are calculated based on several factors:

• Payroll: Premiums are expressed as a rate per $100 of payroll
• Job classification codes: Each type of work has a specific risk class code that determines the base rate
• Experience modification factor (EMR): Your claims history compared to others in your industry. A clean record earns a discount; frequent claims increases your rate
• State and carrier filing rates

Typical Texas Workers' Comp Rates by Industry

Industry	Rate per $100 Payroll
Clerical / Office workers	$0.30 – $0.80
Retail / Food service	$1.00 – $3.00
Plumbing / HVAC contractors	$4.00 – $9.00
Roofing contractors	$12.00 – $25.00
Trucking / Transportation	$5.00 – $14.00

For a concrete example: A small restaurant with $500,000 in annual payroll at a $2.00 rate would pay approximately $10,000 per year in workers' comp premiums — a fraction of what a single serious injury lawsuit could cost without coverage.

Reducing Your Workers' Comp Premiums

Texas employers can take several steps to lower their workers' comp costs over time:

1. Implement a written safety program. Insurers offer discounts for documented workplace safety protocols.
2. Return-to-work programs. Getting injured employees back to light duty work quickly reduces the duration of disability claims and lowers your total losses.
3. Classify employees correctly. Misclassifying employees into higher-rated job codes is a common overpayment mistake. Audit your classifications annually.
4. Shop your policy regularly. Workers' comp rates vary significantly between carriers. Comparing quotes every year or two keeps your costs competitive.
5. Build a low experience modifier. Your EMR is calculated over a 3-year rolling period. Fewer claims today means lower premiums in future years.

The Bottom Line for Texas Employers

The question for most Texas employers is not "do I have to carry workers' comp?" — the answer is usually no. The real question is "can I afford not to?"

For most businesses with employees — especially those in construction, food service, healthcare, manufacturing, or any other physically demanding industry — the answer is clear: workers' comp is an essential protection that safeguards both your employees and your business.

Texas Insurance Central can connect you with insurance professionals who work with Texas workers' compensation carriers to help you explore competitive rates. Submit a free quote request today.