Where does the premium come from?


A Workers’ Compensation policy is derived from payroll, for both the owner and employee. In the state of Tennessee the minimum state payroll for a sole proprietor is $20,800 and the maximum is $63,800.


For some owners, this is not a price they would like to pay if they have health insurance in place that does not exclude work place injuries. In that case they can opt on to the Workers’ Compensation exemption registry. If registered with the Exemption Registry, all Workers’ Compensation related injuries would be exempt.  No premiums would be paid on your behalf to the collecting party (such as a hospital, doctor, or long-term disability care).


In order to calculate the Workers’ Compensation premium, one can take the projected amount paid to their employees and themselves for the upcoming year–keeping in mind the state minimum and maximum payroll. An example of this would be as follows, $20,800 (owners payroll) X the rate of ___ (approximate rate for your class) = Base Premium/plus state fees. (Workers’ Compensation is based on per $100 of the projected payroll.)  Below is another example of how a Workers’ Compensation policy would look.



Mike’s Drywall, Inc.

Mike Smith (owner) has decided to exempt himself from the policy because he has active health insurance that does not exclude work related injuries. 

Mike has two employees that make $10 an hour hanging drywall.  

For the next year, Mike and his employees will work 40 hours each week. Mike’s Drywall, Inc., will pay $41,600 in payroll.

$41,600 would be used to figure the Workers’ Compensation premium. 

$41,600 payroll  X  7.49% drywall rate* = $3,115.84 direct premium payroll


$3,115.84 plus taxes and fees would be the Workers’ Compensation premium.

If Mike had decided to be included in the Workers’ Compensation policy, his payroll would have been included based on state minimum/maximum.



If the owners or sole proprietors decide to become exempt the following information would be needed:  First and Last name, entity type, Date of Birth, Social Security Number, Phone Number, Email address, Physical and Mailing address (if different), Business Entity Name (if used), Federal ID Number, and either a County or City Business License.


You can call the Tennessee Department of Labor and Workforce Development’s Workers’ Compensation Division at 1-800-332-2667. A Workers Compensation Specialist will answer your questions or direct you to someone that can.