Workers' compensation is insurance paid by companies to provide benefits to employees who become ill or injured on the job. Through this program, workers are provided with benefits and medical care, and employers have the assurance that they will not be sued by the employee.
The cost of workers' compensation benefits is based on the gross payroll and the number and severity of illnesses and injuries that type of employer experiences. For example, a manufacturing company would have higher workers' compensation costs than a professional practice.
Workers' compensation is administered by states, through the U.S. Department of Labor's Office of Workers' Compensation Programs. Look up your state's regulations on this list of state workers' compensation laws.