An Alabama corporation must carry workers compensation once it has five or more employees (Alabama Code section 25-5-50). Because a corporation is its own legal person, its officers and shareholders who work in the business are generally treated as employees, so they usually count toward the five and can be covered. Officers can often look at leaving their own coverage off, but the exact election is worth confirming with the state.
Who this is for: Owners of Alabama C-corps and S-corps, including one-person and family corporations, deciding whether the company needs a policy and whether the officers belong on it.
The short version
- Five employees is the trigger. A corporation with five or more employees must carry workers comp in Alabama.
- Working officers are usually employees. Officers who draw a wage and do the work are generally counted toward the five, unlike a sole proprietor.
- Officers can look at opting out of their own coverage. Alabama allows certain owner elections, but confirm the current form and whether it changes your count with the state.
- Regular staff always count. W-2 employees count toward the five whether full-time or part-time.
- Contracts can require coverage regardless. Clients and general contractors often demand proof even below five.
How a corporation is counted
| Person | Counts toward the five? | Covered by default? |
|---|---|---|
| Working officer who draws a wage | Usually yes | Usually yes, unless they elect out |
| Regular full-time employee | Yes | Yes |
| Regular part-time employee | Yes | Yes |
| Shareholder who does no work | Usually no | No |
| 1099 worker you control day to day | Usually yes | Treated as an employee if misclassified |
Should officers stay on the policy?
A one-officer or family S-corp is the tricky case. If the officers can elect out of their own coverage and the company has no other employees, you could end up with no one on the policy and no state duty to carry one. That saves premium, but it also means an injury to a working officer is not paid by comp. If your officers do physical work, keeping them covered is often worth the cost. A personal health plan may not fully pay for a work injury, and lost income is not covered at all. Compare the numbers using our Alabama cost guide.
Do not rely on the corporate shell to skip coverage
Some owners assume incorporating removes the workers comp duty. It does not. Once the corporation has five or more employees, the requirement applies, and misclassifying employees as contractors to stay under the line is exactly what an audit looks for. If you were required to carry coverage and did not, the corporate form will not protect the people who run the company from the consequences. See what happens if you go without.
A Tuscaloosa example
Illustrative, not a quote. A Tuscaloosa S-corp runs an HVAC business with one working owner-officer and five technicians on payroll. The company has more than five people working, so Alabama requires a policy and the technicians must be covered. The owner installs equipment alongside the crew, so he keeps himself on the policy rather than electing out. When a builder asks for proof of coverage before a job, the company already has it. See the trade detail on our workers comp for HVAC contractors page.
Real questions Alabama owners ask
Does my Alabama corporation need workers comp?
If the corporation has five or more employees, yes, under Alabama Code section 25-5-50. Working officers who draw a wage generally count toward the five, so a small corporation can reach the requirement faster than owners expect.
Do corporate officers count as employees in Alabama?
Generally yes when they work in the business and draw a wage. Unlike a sole proprietor, a working officer of a corporation is usually treated as an employee and counts toward the five-employee test.
Can officers opt out of their own coverage?
Alabama allows certain owner elections, so officers can often leave their own injuries off the policy. That exclusion election is now provided to your insurance carrier rather than filed with the Alabama Department of Labor, so confirm the current form and whether opting out changes your headcount with a licensed advisor or carrier.
My S-corp is just me. Do I need a policy?
If you are the only person and you elect out of your own coverage, you may have no one to insure and no state duty. Many one-officer owners still carry coverage because they do physical work or a contract requires proof.
Does incorporating remove the workers comp requirement?
No. Once the corporation has five or more employees, it must carry workers comp just like any other employer. The corporate form does not exempt you from the rule or its penalties.
Do part-time employees count for a corporation?
Yes. Part-time and seasonal employees generally count toward the five in Alabama. A corporation with a mix of full-time and part-time staff can reach five sooner than it thinks.
What if I pay some workers on a 1099?
If those workers are really employees under Alabama's control test, they count toward the five and must be covered. Labeling an employee a contractor does not change the requirement and is a common audit finding.
Why Alabama owners choose Morrow
- We shop the right market for you. In Alabama you buy workers comp on the open market from any private insurer licensed in the state, because Alabama has no state fund, and if no carrier will take you the NCCI-run assigned risk plan is the guaranteed fallback, so we can shop your rate freely and still have a backstop for hard-to-place work.
- We catch pricing mistakes. Your price depends heavily on the category your work falls into for pricing (the class code). Put people in the wrong category and you overpay for years. We review your payroll and classifications before you buy.
- Proof of coverage, fast. Need a certificate (proof of coverage) for a general contractor or a landlord before Monday? We turn those around the same business day for most carriers.
- We help lower the score that drives your price. Insurers give you a score based on your past claims that raises or lowers your cost (the experience modification rate). We review it each year, flag errors, and connect you with return-to-work and safety resources that bring it down.
- Real people when a claim happens. When someone gets hurt, we stay involved through the life of the claim, not just at renewal.
Related Alabama guides
Every Alabama business is set up a little differently. These companion guides answer the same question for other situations, plus the national explainers behind the terms used here.
- Business insurance in Alabama (start here)
- Workers comp: the owner's overview
- I own an LLC: do I need workers comp?
- I'm a sole proprietor: do I need workers comp?
- We're a partnership: do we need workers comp?
- We're a nonprofit: do we need workers comp?
- My workers are 1099: do I still need it?
- Only part-time or seasonal staff: do I need it?
- I only employ family: do I need workers comp?
- Remote or out-of-state staff: do I need coverage?
- What happens if I don't carry workers comp?
- How much does workers comp cost?
- How do I get workers comp (even if turned down)?
- What insurance do I need for a contractor license?
- Workers compensation insurance, explained
- What workers comp costs (national guide)
- Hiring your first employee: what changes
- Workers comp vs employers liability
- Alabama HVAC workers comp
This guide is general information, not legal advice. Alabama rules and penalty amounts can change, so verify current requirements with Alabama Department of Labor, Workers' Compensation Division or a licensed advisor before you rely on them. Last updated: July 2026.