In Illinois, employing family does not automatically get you out of workers' comp. A relative you pay to work in the business generally counts like any other employee, so if you have staff, coverage is required from the first hire (820 ILCS 305/3). Family members are outside the requirement only if they qualify as exempt owners, or if they fall under a narrow farm or household exemption. So family status changes some options, but it is not a blanket exemption.
Who this is for: Illinois owners who employ a spouse, child, parent, or other relatives.
The short version
- Family members you pay generally count as employees toward the requirement.
- Family who are owners can be exempt only through the owner rules for their entity, like a corporate officer or LLC member exempting out.
- A relative doing household work is covered only at 40 or more hours a week for 13 or more weeks in a year.
- Family working on a small farm can fall under the agricultural exemption, which excludes the employer's family from the labor count.
- Outside those cases, a family employee is covered like anyone else.
How Illinois treats family on the payroll
A relative you pay to work in the business is generally an employee and must be covered, the same as an unrelated worker. Illinois does not offer a general "exclude my spouse or child" endorsement the way a few states do. Instead, a family member is left off only through one of the paths the Act already provides. If the relative is an owner, a corporate officer, or an LLC member, they can exempt themselves the way any owner does. If the work is household work in your home, a domestic worker is not covered until they hit 40 or more hours a week for 13 or more weeks. And on a farm, the Act excludes the employer's family when it counts agricultural labor.
| Family work situation | Counts as an employee? | What to know |
|---|---|---|
| Spouse or child working on your crew | Generally yes | Covered like any employee unless they are an owner who exempts out |
| Parent working in your shop | Generally yes | Covered like any employee; no special family carve-out |
| Relative doing household work in your home | Generally no | A domestic worker is covered only at 40+ hours a week for 13+ weeks in a year |
| Family working on a small farm | Often no | The employer's family is excluded from the agricultural labor count |
When family can be left off
The cleanest way a family member comes off the policy is by being an owner who exempts out. A spouse who is a co-owner of the LLC, or a child who is a corporate officer, can exempt themselves the same way any owner does, by written notice to the carrier. A relative who is just a paid worker, though, is covered like anyone else, and there is no shortcut for that. Keep in mind that leaving a family member off means their own on-the-job injury will not be paid by comp, so weigh that against the premium savings, especially for a relative doing physical work.
A Peoria example
Illustrative, not a quote. A Peoria auto repair shop is run by the owner, the owner's spouse who is a co-owner and handles the front desk, and one mechanic on payroll. Because there is a paid employee, Illinois requires a policy, and the mechanic must be covered. The spouse, as a co-owner, can exempt out by written notice to the carrier to trim premium, while the mechanic stays fully covered. We place the policy and rate the repair-shop payroll correctly. See our workers comp for auto repair shops page.
Real questions Illinois owners ask
Do I need workers comp if I only employ family in Illinois?
Often yes. Family members you pay generally count as employees, so if you have any staff, coverage is required from the first hire, unless the relative qualifies as an exempt owner.
Can I exclude my spouse or child from the policy?
Only through the owner rules. Illinois has no general family exclusion, so a spouse or child comes off only if they are an owner, officer, or LLC member who exempts themselves out.
Is a family member who does household work an employee?
Usually not, below the threshold. A relative doing household work in your home is covered only once they work 40 or more hours a week for 13 or more weeks in a year.
Do my family workers count toward the requirement?
Generally yes. A relative you pay to work in the business counts as an employee, so a family worker triggers coverage the same as an unrelated one.
Is family labor on a farm treated differently?
Yes. On a farm, the Act excludes the employer's family when it counts agricultural labor, so family farm work can fall outside the requirement.
Should I take a family member off the policy to save money?
It depends. Leaving an eligible owner-relative off lowers premium, but their own on-the-job injury will not be paid by comp, so weigh that carefully for a relative doing physical work.
Why Illinois owners choose Morrow
- We shop the right market for you. In Illinois you buy workers' comp on the open market from any private carrier licensed in the state, because Illinois has no state fund; if no carrier will take you, the Illinois Workers' Compensation Assigned Risk Plan (the assigned-risk plan) is the guaranteed fallback, so we can shop your rate freely and still keep 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 Illinois guides
Every Illinois 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 Illinois (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?
- I own a corporation (C-corp or S-corp): do I need it?
- 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?
- 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)
- Do sole proprietors need workers comp?
- Hiring your first employee: what changes
- Illinois auto repair workers comp
This guide is general information, not legal advice. Illinois rules and penalty amounts can change, so verify current requirements with the Illinois Workers' Compensation Commission (IWCC) or a licensed advisor before you rely on them. Last updated: July 2026.