South Dakota Workers' Compensation Payroll Department Guide
South Dakota Workers' Compensation Payroll Department Guide
South Dakota takes a different approach to workers' compensation coverage than many states. South Dakota does not generally require employers to carry workers' compensation insurance, but employers that do not provide coverage may face direct liability and may be sued in civil court by an injured employee. Employers that provide workers' compensation coverage generally provide medical and disability benefits for qualifying work-related injuries and diseases.
Payroll departments play an important role in workers' compensation administration because accurate wage, hours-worked, employment, classification, and payment records may be required to administer claims and calculate benefits.
At A Glance
- South Dakota does not generally require employers to carry workers' compensation insurance, but employers that do not carry coverage may be subject to civil lawsuits for workplace injuries
- Most employers that provide workers' compensation protection obtain coverage through an insurance carrier, while some employers may qualify for self-insurance
- South Dakota workers' compensation coverage generally applies broadly, subject to specific statutory exceptions
- Farm and agricultural labor generally is excluded from South Dakota workers' compensation coverage
- Domestic servants are generally excluded unless they work more than 20 hours in a calendar week and more than six weeks in a 13-week period
- Certain independent contractors may be excluded, including individuals who qualify for applicable independent-contractor certification
- Employees should provide written notice of an injury to the employer within three business days, or as soon as practicable
- Employers generally must submit the First Report of Injury to their workers' compensation insurance carrier within seven days of learning of the injury, subject to applicable rules concerning Sundays and legal holidays
- Payroll should maintain accurate wage and hours-worked information because the First Report of Injury requires detailed employee and employment information
- Workers' compensation benefits can include medical treatment, temporary disability benefits, permanent disability benefits, rehabilitation, and survivor benefits
Compliance Overview
South Dakota's workers' compensation system is administered by the Division of Labor and Management within the South Dakota Department of Labor and Regulation. Unlike many states, South Dakota does not impose a general requirement that every employer purchase workers' compensation insurance.
Employers that elect to carry workers' compensation coverage receive the protections and obligations associated with the workers' compensation system. An employer that does not provide coverage may be exposed to civil liability if an employee is injured.
Payroll departments generally do not determine whether an injury is compensable or whether an employee is medically disabled. Payroll's primary responsibilities include maintaining accurate wage and employment records, promptly providing information for claims, and accurately tracking compensation and work status following an injury.
Employer Requirements
- Determine whether the business will provide workers' compensation coverage or otherwise assume the applicable risks and liabilities
- Maintain current workers' compensation insurance information when coverage is provided
- Provide required workers' compensation information to employees
- Maintain accurate employee and employment records
- Report qualifying workplace injuries through the required process
- Submit the First Report of Injury to the insurance carrier within the applicable deadline
- Provide a copy of the First Report of Injury to the injured employee
- Maintain the required copy of the First Report of Injury
- Cooperate with the insurance carrier, claims administrator, and South Dakota Department of Labor and Regulation
- Maintain payroll information necessary to calculate applicable benefits
- Coordinate payroll information with HR and the workers' compensation administrator
Coverage Requirements
South Dakota does not generally require an employer to purchase workers' compensation insurance. However, the South Dakota workers' compensation system provides important protections for employers and employees when coverage is provided.
South Dakota law contains specific exceptions to workers' compensation coverage. These include farm or agricultural labor, certain domestic servants, certain independent contractors, certain elected officials, and workfare participants. The exact statutory requirements should be reviewed when determining whether a particular worker is covered.
An employer that does not maintain workers' compensation coverage may be sued in civil court by an injured worker. Payroll should therefore coordinate with management and HR to ensure that the employer's workers' compensation status is accurately documented.
Injury Reporting
- Employees generally must provide written notice of an injury to the employer within three business days, or as soon as practicable
- Employees should report injuries immediately whenever possible
- Employers generally must complete the First Report of Injury after learning of a qualifying injury
- The First Report of Injury generally must be submitted to the workers' compensation insurance carrier within seven days of the employer's knowledge of the injury, excluding Sundays and legal holidays
- Employers must provide a copy of the First Report of Injury to the injured employee
- Payroll should promptly notify HR or the designated workers' compensation contact when an injury affects wages, hours, or work status
- Payroll should accurately document the employee's last day worked, time missed, and return-to-work date
Payroll Records
South Dakota's First Report of Injury requires detailed employee and employment information. Payroll should maintain complete and accurate records that can be provided promptly when a workplace injury occurs.
- Employee name and employment information
- Hire date
- Job title and job experience
- Job classification
- Work location
- Wages
- Hours worked
- Regular pay rates
- Overtime
- Bonuses and commissions
- Other applicable compensation
- Pre-injury earnings
- Post-injury earnings
- Reduced hours
- Modified-duty wages
- Salary continuation
- Paid leave and other employer-paid compensation
South Dakota's current First Report of Injury form should be retained for at least four years from the date of injury.
Benefit Calculations
South Dakota workers' compensation benefits depend on the type of benefit, the employee's average weekly wage, disability status, medical findings, and applicable statutory limits.
- Temporary total disability benefits may be available when a qualifying work-related injury prevents an employee from working
- Temporary disability benefits generally become available when the employee is unable to work for at least seven consecutive calendar days
- Permanent total disability benefits may be available in qualifying circumstances
- Permanent partial disability benefits may be available for qualifying permanent impairments
- Medical benefits may cover necessary first aid, medical, surgical, hospital, rehabilitation, prosthetic, and related services
- Survivor benefits may be available to eligible dependents following a compensable work-related death
Effective July 1, 2026, the South Dakota weekly workers' compensation benefit minimum is $576 and the maximum is $1,152. The applicable rate depends on the type of benefit and the employee's circumstances.
Effective July 1, 2026, South Dakota provides a 2.5% cost-of-living increase for permanent total disability benefits.
Medical Care
Workers' compensation can provide necessary first aid, medical, surgical, hospital, rehabilitation, prosthetic, and related services for qualifying work-related injuries and diseases.
South Dakota employees generally have the right to choose their first medical practitioner. Emergency-room treatment does not constitute the employee's selection of a physician. An employee who wants to change medical practitioners generally must obtain written permission from the employer or insurance carrier.
Payroll generally does not administer medical treatment. Payroll should, however, coordinate with HR and the claims administrator when medical restrictions affect an employee's work status, hours, wages, or return-to-work arrangements.
Modified Duty
An injured employee may return to work with restrictions or modified duties when medically appropriate. Payroll should accurately document any changes in hours, wages, job duties, classification, or compensation associated with modified work.
- Track the date modified duty begins
- Track reduced or modified work hours
- Track modified-duty earnings
- Document changes in pay or compensation
- Maintain records supporting post-injury wage calculations
- Coordinate payroll changes with HR and the claims administrator
- Maintain documentation of changes in work status
Return-To-Work
South Dakota's workers' compensation system emphasizes medical case management and returning injured employees to work as quickly as possible when appropriate. Insurers and self-insured employers are required to provide case management services through certified case management plans.
Payroll should promptly update its records when an injured employee returns to work and should coordinate changes with HR and the workers' compensation administrator.
- Record the employee's return-to-work date
- Determine whether the employee returned to regular or modified duties
- Track applicable work restrictions through the employer's established process
- Record changes in hours and wages
- Track post-injury earnings
- Coordinate payroll changes with HR and the claims administrator
Employee Classifications
Correct employee classification is important because South Dakota has specific statutory exclusions from workers' compensation coverage.
- Review employee classifications periodically
- Review independent-contractor status based on the actual working relationship
- Review whether an independent contractor has applicable South Dakota certification
- Review agricultural and farm labor separately because those workers generally are excluded
- Review domestic-service employees under the applicable hours and duration requirements
- Review workfare and applicable governmental positions when determining coverage
- Coordinate classification questions with HR or qualified legal personnel
Difficult Administrative Areas
- Determining whether a worker is covered when the employer has elected not to carry workers' compensation insurance
- Determining whether a worker falls within a statutory coverage exception
- Handling independent contractors and independent-contractor certifications
- Determining accurate average weekly wage information
- Handling employees with multiple pay rates
- Tracking overtime, bonuses, commissions, and other compensation
- Coordinating workers' compensation payments with salary continuation and paid leave
- Tracking reduced hours and modified-duty earnings
- Responding promptly to wage and employment information requests
- Maintaining consistent information between payroll, HR, timekeeping, and workers' compensation records
- Maintaining the required First Report of Injury documentation
- Handling employees who work in multiple states
- Maintaining appropriate confidentiality of employee wage and medical information
- Keeping workers' compensation procedures and benefit rates current
Common Errors
- Assuming that South Dakota requires every employer to purchase workers' compensation insurance
- Failing to understand the civil liability risks associated with not carrying workers' compensation coverage
- Incorrectly excluding employees who are covered under South Dakota law
- Incorrectly treating an independent contractor as exempt without verifying applicable requirements
- Failing to provide written notice of an injury promptly
- Failing to submit the First Report of Injury within the required period
- Maintaining incomplete wage or hours-worked records
- Providing inaccurate wage information to the insurance carrier or claims administrator
- Failing to track post-injury earnings
- Failing to document modified-duty work
- Failing to coordinate salary continuation or paid leave with workers' compensation payments
- Failing to maintain the First Report of Injury for the required retention period
- Using outdated workers' compensation benefit rates
- Failing to update payroll records when an injured employee returns to work
Recent Court Cases
- South Dakota workers' compensation decisions frequently address compensability, employment status, medical evidence, disability, causation, permanent impairment, and the employee's entitlement to benefits
- Payroll and HR departments should monitor significant South Dakota Supreme Court and workers' compensation decisions when those decisions affect employee classification, benefit administration, medical evidence, or return-to-work practices
- Employers should consult qualified South Dakota workers' compensation counsel when a court or administrative decision creates uncertainty concerning an employee's coverage, benefits, or employment status
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Frequently Asked Questions About South Dakota Workers' Compensation
- Does South Dakota require employers to carry workers' compensation insurance?: No. South Dakota does not generally require employers to carry workers' compensation insurance, but an uninsured employer may be sued in civil court by an injured worker
- Why do South Dakota employers carry workers' compensation insurance if it is not mandatory?: Workers' compensation coverage provides medical and disability benefits for qualifying work-related injuries and diseases and can protect covered employers from direct civil liability for covered workplace injuries
- Can a South Dakota employer purchase workers' compensation insurance?: Yes. Most employers that provide workers' compensation coverage purchase insurance through an insurance carrier
- Can a South Dakota employer self-insure?: Yes. Certain employers may qualify for self-insured status subject to applicable requirements
- Are part-time employees covered by South Dakota workers' compensation?: Coverage depends on whether the employee is subject to the Workers' Compensation Law and whether a statutory exclusion applies. Part-time status alone should not automatically be treated as an exclusion
- Are agricultural employees covered by South Dakota workers' compensation?: Farm and agricultural labor generally is excluded from South Dakota workers' compensation coverage
- Are domestic employees covered by South Dakota workers' compensation?: Domestic servants generally are excluded unless they work more than 20 hours in a calendar week and more than six weeks in a 13-week period
- Are independent contractors covered by South Dakota workers' compensation?: Certain independent contractors are excluded from coverage. South Dakota provides a certification process for certain independent contractors, and employers should verify applicable requirements rather than relying solely on a contract or Form 1099
- How quickly should an employee report a workplace injury in South Dakota?: Employees generally must provide written notice to the employer within three business days, or as soon as practicable
- How quickly must an employer report a workplace injury?: An employer generally must submit the First Report of Injury within seven days of learning of the injury, excluding Sundays and legal holidays, when the injury falls within the applicable reporting requirements
- What form is used to report a South Dakota workplace injury?: The First Report of Injury is Form 101
- How long should an employer keep the First Report of Injury?: The current South Dakota First Report of Injury instructions require the employer to retain a copy for at least four years from the date of injury
- How are South Dakota workers' compensation benefits calculated?: Benefits depend on the type of benefit, the employee's average weekly wage, disability status, medical findings, and applicable statutory limits
- What are South Dakota's workers' compensation rates for 2026?: Effective July 1, 2026, the minimum weekly workers' compensation rate is $576 and the maximum weekly rate is $1,152
- Does South Dakota provide a cost-of-living adjustment?: Yes. Effective July 1, 2026, the permanent total disability cost-of-living adjustment is 2.5%
- What payroll records are important for a South Dakota workers' compensation claim?: Important records can include wages, hours worked, job experience, job classification, employment dates, pre-injury earnings, post-injury earnings, modified-duty wages, salary continuation, and paid leave
- What happens when an injured South Dakota employee returns to work?: An employee may return to regular or modified work depending on medical restrictions and the circumstances of the claim. Payroll should accurately track hours, wages, duties, restrictions, and changes in compensation
- Does South Dakota provide medical benefits for injured workers?: Yes. When workers' compensation coverage applies, necessary first aid, medical, surgical, hospital, rehabilitation, prosthetic, and related services may be provided for qualifying work-related injuries and diseases
- Does South Dakota provide case management for injured workers?: Yes. Workers' compensation insurers and self-insured employers are required to provide case management services through certified case management plans
- What are common South Dakota workers' compensation payroll mistakes?: Common mistakes include failing to understand the state's optional insurance structure, incorrectly classifying workers, delaying injury reporting, maintaining inaccurate payroll records, failing to document post-injury earnings, and using outdated benefit rates
- Where can employers find official South Dakota workers' compensation information?: Official information is available through the South Dakota Department of Labor and Regulation, Division of Labor and Management, including information concerning coverage, injury reporting, benefits, rates, case management, forms, and employer responsibilities
