In Michigan, employing family does not automatically get you out of workers' comp. If your business meets the state's test (3 or more people working at one time, or one person at 35 or more hours a week for 13 weeks or longer; MCL 418.115), family members on the payroll generally count like any other employee. The law does let you exclude a spouse, child, or parent by naming them in the policy, and it treats a relative living in your home as a household worker differently. So family status changes some options, but it is not a blanket exemption.
Who this is for: Michigan owners who employ a spouse, child, parent, or other relatives.
The short version
- Family members you pay generally count as employees toward the coverage test.
- Michigan lets a policy exclude a named spouse, child, or parent in the employer's family by endorsement (MCL 418.161(2)).
- A family member who lives in your home and works as a household domestic is not an employee (MCL 418.118).
- A live-in family situation is different from a relative working in your storefront or on your crew.
- Excluding a family member is a filing on the policy, not just a verbal arrangement.
How Michigan treats family on the payroll
A relative you pay to work in the business is generally an employee and counts toward the coverage test, the same as an unrelated worker. Two carve-outs matter. First, if the family member lives in your home and works as a household domestic, they are not treated as an employee under MCL 418.118, and coverage for a live-in domestic is required only once that person works 35 or more hours a week for 13 weeks or longer. Second, a workers' comp policy may exclude a named spouse, child, or parent in the employer's family by endorsement. Everyone else on the payroll still counts.
| Family work situation | Counts as an employee? | What to know |
|---|---|---|
| Spouse or child working on your crew | Generally yes | Counts toward the test; may be excluded by naming them in the policy |
| Parent working in your shop | Generally yes | Counts toward the test; may be excluded by endorsement |
| Relative living in your home doing household work | Generally no | A live-in family domestic is not an employee; coverage only at 35+ hours for 13+ weeks |
| Adult relative working full time in the business | Yes | Treated like any employee unless a valid exclusion is filed |
Excluding a family member
If you want to keep a spouse, child, or parent off the policy, Michigan lets you do it, but it takes a filing. The policy is endorsed to name the excluded family member (MCL 418.161(2)), and where the business is a partnership, the same rule lets you name a partner or a spouse, child, or parent in the family. This is documented, not just agreed by handshake, and everyone not named stays covered. Keep in mind that excluding a family member 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 Flint example
Illustrative, not a quote. A Flint auto repair shop is run by the owner, the owner's spouse who handles the front desk, and one full-time mechanic. With three people working at one time, Michigan requires a policy, and the mechanic must be covered. The owner chooses to name the spouse in an exclusion endorsement to trim the premium, since the spouse works the counter and not in the bays, while the mechanic stays fully covered. A broker places the policy and rate the repair-shop payroll correctly. See our workers comp for auto repair shops page.
Real questions Michigan owners ask
Do I need workers comp if I only employ family in Michigan?
Often yes. Family members you pay generally count toward the coverage test like any employee, so if you meet the 3-at-one-time or 35-hours-for-13-weeks trigger, a policy is required.
Can I exclude my spouse or child from the policy?
Yes. Michigan lets a policy exclude a named spouse, child, or parent in the employer's family by endorsement, so you can keep them off while other workers stay covered.
Is a family member who lives with me an employee?
Usually not, if they do household work. A relative living in your home who works as a household domestic is not treated as an employee, and coverage is required only at 35 or more hours a week for 13 weeks.
Do my family workers count toward the 3-person test?
Generally yes. Relatives you pay to work in the business count toward the 3-people-at-one-time trigger, unless a valid exclusion is filed for a named spouse, child, or parent.
Should I exclude a family member to save money?
It depends. Excluding a family member lowers premium but means their own on-the-job injury will not be paid by comp, so weigh that carefully for a relative doing physical work.
Does excluding family require paperwork?
Yes. The exclusion is an endorsement that names the family member on the policy, not just a verbal understanding, so it has to be documented to be valid.
Related Michigan guides
Every Michigan 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 Michigan (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
- Michigan auto repair workers comp
This guide is general information, not legal advice. Michigan rules and penalty amounts can change, so verify current requirements with the Michigan Workers' Disability Compensation Agency (WDCA) or a licensed advisor before you rely on them. Last updated: July 2026.