Whether you’re a Maryland small business owner hiring your first employee or a worker who has just been hurt on the job, workers’ compensation is one of the most important — and most misunderstood — parts of employment law. This guide answers every core question in plain English, updated for 2025–2026.

1. What is workers’ compensation?

Workers’ compensation (often called “workers’ comp” or “work comp”) is a state-mandated insurance program that provides financial benefits to employees who suffer work-related injuries or illnesses. In Maryland, the program is governed by Title 9 of the Maryland Labor and Employment Code and administered by the Maryland Workers’ Compensation Commission (MWCC).

The system operates on a no-fault basis — meaning an injured employee does not have to prove that their employer was negligent to receive benefits. In exchange, employees who receive workers’ comp generally cannot sue their employers for damages arising from the same injury. This trade-off protects both sides: workers get guaranteed benefits; employers get protection from costly lawsuits.

2. Who is required to carry workers’ compensation?

Maryland law is straightforward on this: virtually every employer with one or more employees must carry workers’ compensation insurance. This applies regardless of whether employees are full-time, part-time, seasonal, or temporary.

Covered employee types

• Full-time employees
• Part-time employees
• Seasonal and temporary workers
• LLC members who provide services for monetary compensation (with some ownership exceptions)
• Corporate officers (unless they elect to be exempt)
• Leased or borrowed employees

Special rules for business owners

Maryland draws a meaningful distinction based on how a business is structured:

• Sole proprietors and partners are excluded from coverage by default, but may elect to opt in by filing the appropriate form with the MWCC. If they choose to be covered, they must use a deemed payroll of $72,900 (2024 figure).
• Corporate officers are automatically included but may elect to be exempt from coverage.
• LLC members who own more than 20% of the company may elect to be exempt; those with smaller ownership stakes are automatically covered.
• Large employers with a net worth of $1 million or more may apply to the MWCC to self-insure instead of purchasing a commercial policy.

3. Exemptions & exclusions

While Maryland’s coverage requirements are broad, a few categories of workers and employers fall outside the mandatory framework:

• Independent contractors (1099 workers) — Maryland law does not extend workers’ comp requirements to independent contractors. However, misclassification is a serious risk; if the MWCC determines a worker was actually an employee, the employer can face significant liability.
• Small agricultural employers — Agricultural employers are exempt if they have fewer than three full-time employees and an annual full-time payroll below $15,000.
• Domestic workers in private homes — Household workers employed by individual homeowners are generally excluded.

4. How does workers’ compensation work in Maryland?

Understanding the process from injury to benefit payment helps both employers and employees navigate claims more smoothly. Here is how a typical claim unfolds:

1. Injury or illness occurs. The injury must “arise out of and in the course of employment” — meaning it must happen because of conditions required by the employer for doing the job. Both sudden traumatic injuries (falls, cuts, fractures) and gradual occupational diseases (repetitive stress injuries, chemical exposure) qualify.

2. Employee reports the injury to the employer. Prompt reporting is essential. Delays can complicate or jeopardize a claim. There is no strict statutory deadline for the worker to notify the employer, but timeliness is strongly advised.

3. Employer files a “First Report of Injury.” Maryland law requires employers to report any accident to the MWCC within 10 days of receiving oral or written notice of the injury — if the employee missed more than three days of work as a result.

4. Employee seeks authorized medical treatment. The employer’s insurance carrier has the right to direct medical care to authorized providers in Maryland. Workers should always confirm that their treating physician is authorized by the insurer.

5. Insurer accepts or disputes the claim. If the insurer accepts the claim, benefit payments begin. If the insurer disputes it, either party can request a hearing before the MWCC.

6. MWCC hearing (if disputed). The Maryland Workers’ Compensation Commission serves as the primary forum for resolving contested claims. Injured employees have the right to legal representation; attorney fees are set as a percentage of the award and must be approved by the Commission.

7. Benefits are paid and claim is resolved. Once the employee reaches maximum medical improvement, the claim is typically closed or settled. Permanent disability benefits may continue beyond this point.

5. What benefits does Maryland workers’ comp cover?

Maryland’s workers’ compensation system provides several categories of benefits, depending on the severity and permanence of the injury:

Medical benefits

All reasonable and necessary medical expenses directly related to the work injury are covered — including emergency care, hospitalization, surgery, physician visits, prescription medications, physical therapy, and rehabilitation services. There is no dollar cap on medical benefits in Maryland.

Temporary total disability (TTD)

When an injury prevents an employee from working entirely during recovery, they may receive TTD benefits equal to approximately two-thirds (66⅔%) of their average weekly wage, subject to statewide maximum and minimum amounts that are updated annually. Benefits begin after the employee misses more than three days of work.

Temporary partial disability (TPD)

If an injured worker can return to work in a limited capacity at reduced earnings, TPD benefits make up a portion of the wage difference between pre-injury and post-injury earnings.

Permanent partial disability (PPD)

When a work injury causes a permanent impairment that does not completely prevent employment, the worker may receive PPD benefits. The amount is based on the severity of impairment — often assessed using an “impairment rating” — and the specific body part affected. For example, a worker who loses a finger may receive a scheduled lump-sum payment for the permanent loss.

Permanent total disability (PTD)

In the most severe cases, where an injury leaves a worker permanently unable to engage in any gainful employment, PTD benefits can last for life.

Vocational rehabilitation

If a worker cannot return to their previous job due to permanent physical restrictions, Maryland’s system offers vocational rehabilitation services to help them acquire new skills or find suitable alternative employment.

Death benefits

If a work-related injury or illness causes an employee’s death, their dependents may receive weekly death benefits, and the employer’s insurer is responsible for reasonable funeral and burial expenses.

6. How much does workers’ compensation cost in Maryland?

Workers’ comp premiums in Maryland are paid entirely by the employer — it is a misdemeanor under Maryland law to deduct any portion of the cost from an employee’s wages. The premium is calculated using the following formula:

Premium = (Payroll ÷ $100) × Class Code Rate × Experience Modification Factor

The three key cost drivers

1. Industry class code. The National Council on Compensation Insurance (NCCI) assigns a four-digit class code to each type of work. Higher-risk occupations carry higher rates. A clerical office worker (class 8810) might cost as little as $0.08 per $100 of payroll, while a residential carpenter (class 5645) might cost $7.70 per $100.

2. Payroll size. Premium scales directly with total payroll. A contractor with $500,000 in payroll pays roughly twice as much as one with $250,000 in payroll, all else being equal.

3. Experience modification factor (EMR). The EMR is a multiplier based on a business’s actual claims history compared to the average for its industry. A clean history yields an EMR below 1.0, reducing your premium. Frequent or severe claims push the EMR above 1.0, increasing it.

Maryland rate examples by industry (2025)

Rates sourced from NCCI partner carrier data (2025). Actual premiums vary by insurer and claims history. Consult a licensed broker for an accurate quote.

Where to buy coverage

Maryland employers can purchase workers’ compensation from any private carrier licensed to write workers’ comp in the state. If your business is high-risk and cannot find coverage in the standard market, the Assigned Risk Pool (also called the residual market) is available as a last resort. Some employers also find flexible “pay-as-you-go” programs that allow premiums to be paid monthly based on actual payroll rather than estimates, which reduces audit surprises.

7. Penalties for failing to carry workers’ compensation

Going uninsured in Maryland carries steep consequences for both employers and their officers:

Maryland also maintains a public database where anyone can verify a business’s workers’ compensation coverage by searching by business name or FEIN number — making non-compliance easy to detect by injured workers, attorneys, and regulators alike.

8. Frequently asked questions