Virginia Employer Requirements: Unemployment Insurance, New Hire Reporting, and Workers' Compensation
Your first employee in Virginia triggers several government registrations at once. Skip any of them and a small business can face penalties or coverage gaps it never saw coming. Here's exactly when each requirement kicks in and what to file first.
Key Takeaways
• A business paying wages to a worker in Virginia generally triggers Virginia Employment Commission (VEC) registration for unemployment insurance.
• New and rehired employees must be reported to the Virginia New Hire Reporting Center within 20 days of the hire date.
• Workers' compensation insurance becomes mandatory once a business regularly has more than two employees, including certain subcontractor employees.
• A sole proprietor with no employees and no qualifying subcontractors isn't required by law to carry workers' compensation coverage.
• Once workers' compensation coverage is legally required, Virginia allows no waivers or exceptions.
When You Officially Become an "Employer" in Virginia
A business generally becomes an employer the moment it pays wages to a worker performing services in Virginia. The status carries multiple registration obligations, separate from forming an LLC or corporation with the SCC. An entity formation and an employer status are two different legal events. A founder needs each piece handled correctly.
Registering With the Virginia Employment Commission for Unemployment Insurance
Most employers paying Virginia wages need to register with the Virginia Employment Commission for unemployment insurance. Online registration through VEC's iFile or iReg system can issue an employer account number and a tax rate right after a successful submission.
New Virginia employers currently start at a base unemployment tax rate of 2.5%, plus any applicable add-ons. The starting rate applies until they qualify for a calculated rate based on actual claims history. Confirm the current new-employer rate directly on VEC's site before registering, since rates and add-ons can shift from year to year.
Virginia New Hire Reporting
Virginia law requires employers to report newly hired and rehired employees within 20 days of the hire date. Reports go to the Virginia New Hire Reporting Center. Employers filing electronically or by magnetic media submit two monthly transmissions, spaced according to the Center's specified interval.
New hire reporting exists to help state agencies enforce child support orders and detect improper benefit claims. A missed report risks more than a penalty. It also slows enforcement processes depending on timely employer data.
Workers' Compensation Insurance: When It Becomes Mandatory
Virginia workers' compensation coverage generally becomes mandatory once an employer regularly has more than two part-time or full-time employees, meaning three or more. Executive officers count toward this threshold.
The subcontractor rule extends further than many founders expect. The Virginia Workers' Compensation Commission counts employees of subcontractors hired to perform the same trade, business, or occupation, or to fulfill a contract, toward the employer's total. The rule reaches well beyond construction trades alone.
A sole proprietor with no employees and no qualifying subcontractors faces no legal requirement to carry workers' compensation coverage. Once the threshold is crossed, coverage becomes mandatory with no waivers or exceptions. Certain individuals can elect to reject coverage for themselves under specific rules. The election doesn't remove them from the employer's headcount for threshold purposes.
Withholding Tax Registration
A separate registration applies to Virginia income tax withholding. An employer registers with Virginia Tax to withhold state income tax from employee wages. The registration runs independently from VEC's unemployment insurance registration. Many new employers assume one registration covers everything, but Virginia treats them as distinct filings with separate agencies.
Required Workplace Postings
Virginia employers generally need to display certain required postings in the workplace, covering topics such as minimum wage, workers' compensation rights, and unemployment insurance. Required postings can vary depending on industry and employee count. Confirm the current list through VEC and the Virginia Department of Labor and Industry before your first hire starts work.
Common Mistakes
• Workers' comp sometimes gets treated as optional for a small employer below some informal headcount, when the actual threshold is more than two employees.
• The 20-day new hire reporting window sometimes gets missed entirely, especially by founders juggling hiring paperwork alone.
• VEC registration and Virginia Tax withholding registration sometimes get treated as a single step, when they are two separate registrations with two different agencies.
• Subcontractor employees sometimes get left out of a workers' comp headcount, even when they perform the same trade or fulfill the same contract.
FAQ
When does a Virginia business need workers' compensation insurance?
Coverage generally becomes mandatory once an employer regularly has more than two employees, counting executive officers and certain qualifying subcontractor employees.
How many days do I have to report a new hire in Virginia?
Twenty days from the hire date, with electronic or magnetic filers submitting two monthly transmissions on the schedule the New Hire Reporting Center sets.
Do I need to register with the VEC if I only have one employee?
Generally yes. Wages paid to a worker in Virginia generally trigger VEC registration for unemployment insurance, regardless of employee count.
Are sole proprietors required to carry workers' comp?
A sole proprietor with no employees and no qualifying subcontractors isn't required by law to carry coverage.
Do subcontractors count toward my employee count for workers' comp purposes?
Yes, when they perform the same trade, business, or occupation as the hiring business, or work to fulfill a contract.
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Sources
• Virginia Employment Commission - Employers
• Virginia Employment Commission - Filing Unemployment Taxes
• VEC - Employer Registration FAQ
• Virginia Workers' Compensation Commission - Employers
• Virginia Workers' Compensation Commission - Employer FAQs
• Virginia New Hire Reporting Center - Reporting Fundamentals
• Virginia Tax - Register a Business in Virginia
Disclaimer: This article is for general information only and isn't legal, tax, or insurance advice. Confirm current registration requirements and thresholds directly with the VEC, the Virginia Workers' Compensation Commission, and Virginia Tax.