How Much Does Workers’ Comp Cost?

If you are in business long enough, an accident or injury at work is going to happen. And when it does, it is wise as a business owner to know what to expect along with the potential liabilities and expenses that go along with these unfortunate events.

That is why most business owners with employees are required to carry some form of workers’ compensation insurance. The total costs that businesses pay are determined by their insurance company and workers’ compensation coverage.

Though the final cost a company must pay for work-related injuries and illnesses varies, there are some standards and averages that certain sectors have. Let’s take a look at how workers’ comp rates work.

What Is the Average Cost for Workers Comp Insurance?

The price of workers’ compensation goes beyond the insurance company and policy plan. There are other factors in play, such as annual payroll, the industry, claims history, type of work, experience modification, and the state in which the business operates. Workman’s comp insurance gets regulated at the state level. This means that the workers’ comp cost varies based on the state in which employees work. Additionally, you can expect companies with more employees and a higher risk for work-related injuries or illnesses to pay higher premiums for insurance.

Depending on the total number of workers, the size of a business, and the industry, workers’ compensation insurance can range from as little as a hundred dollars per month to thousands.

The good thing about workers’ comp is that the longer a business goes without having to file a claim, the premiums can decrease. Therefore, the safer a business is, the less money it needs to pay per month.

What Is the Average Cost for Workers Comp Insurance

How Is Workers Comp Calculated?

This all depends on the insurance company and the state’s policies. The best way to know exactly how much you pay is to, of course, contact an insurance provider. However, there is a simple formula to get you on the right path: annual payroll amount divided by 100, multiplied by workers’ comp insurance rate.

Insurance companies have different ways of determining the cost of coverage and the premium, so this is just a basic way to determine rates. As stated, there are other factors like risk factors at work and state laws. For example, insurance companies factor in an experience modification rate. This means that the workers’ comp rate can be lower if your business has a short or nonexistent history of claims.

All businesses must comply with the National Council on Compensation Insurance. This agency bureau collects information and data regarding workers’ compensation rates, so it is important to adhere to its standards.

How to Calculate Workers’ Compensation for an Employee

There is a simple way to calculate costs and premiums for an individual employee. First, you need to identify their class code. Each employee gets one based on the industry they work in. Either the state’s workers’ compensation agency distributes the classification code or the National Council on Compensation Insurance. In essence, class codes designate an employee to a certain category based on their type of work and the duties and risks that factors into it.

Once you have the class code, you then need to determine the premium rate for that class code. You can ask your provider for the rate. If you are looking for a different workers’ compensation insurance provider, you can ask them for their rates based on class codes. They should provide you with the base rate amount per 100 dollars for each classification code.

After getting the premium cost, you then need to consider the payroll for all employees, including full-time, part-time, and temporary. Once you have the annual gross amount for employee payroll, you can then determine the payroll amount per employee. Take the annual rate for the employee then divide it by 100. Once there, multiply the number by their premium costs (based on their class code). After that, you have the workers’ comp rate for an individual employee.

What Is the Average Workers Comp Insurance in California?

The workers’ comp rates in California tend to be the highest in the entire country. However, there has been no major increase in the past few years due to new legislation passed to prevent medical provider fraud. Yet, rates are around $3.50 per 100 dollars, which is almost double the national average. Every workers’ comp insurance company must adhere to the Workers’ Compensation Ratings Bureau of California when determining their premium rates in California.

Overall, there are some theories as to why the workers’ compensation insurance cost is so high. One of the leading arguments is that there is high demand for insurance company providers, so coverage and policy rates can be higher. Additionally, the state offers coverage for missed wages, medical bills, and legal bills per employee involved in the accident.

For Small Business

Costs for small businesses tend to be lower than larger businesses because the annual payroll is lower as is the number of workers. Since there are fewer workers in a small business, it is less likely that a work-related accident takes place. Despite all this, each small business should have workers’ compensation in case there is an accident that requires the filing of workers’ compensation claims.

Without insurance, workers’ compensation claims can cost tens of thousands of dollars. That’s why paying the cost of a premium rate has more benefits than paying the flat rate for medical expenses and a salary with an absent employee.

Small business owners usually pay the insurance company between one dollar and $2.50 per 100 dollars on a covered payroll. Again, this rate is determined based on workers’ compensation laws that vary between states.

For Large Business

Since there are more workers, the base rate alone for workers’ compensation insurance is higher for a large business. Plus, a larger company is also more likely to have a claims history, which also factors into workers’ compensation rates.

Overall, coverage for employers with a large number of employees can range around the $2000 mark. The workers’ compensation insurance cost for those with more employees requires more payment since there is more risk.

For Construction

Construction and contracting sectors tend to have the largest claims histories based on the high risk factors that go along with the job. Since there is more risk, employers of construction companies need workers’ compensation insurance.


Roofing is a sector of the construction industry that is considered high risk. The average rate for workers’ compensation in roofing is around $10,000 annually. Considering the risk factors that roofers endure while on the job, a policy with this cost may have more benefits than paying for bills related to an accident.


Though painting seems like there is not much risk to it, this sector of construction still needs to have workers’ comp benefits for employees. In general, if you climb a ladder at work, the risks are high.

All in all, the workers’ comp rate for professional painters is around $3,000 annually. Much lower than roofers, it is still necessary to cover all workers in case there are accidents on the job.

How Much Does Workers’ Comp Cost for Offices?

The experience of an office worker is much more different than that of a construction worker. With that being said, the rate for workers’ compensation for offices is lower since there is little risk. Again, to calculate how much you can expect to pay, use the formula: experience mod rate times payroll divided by 100 x class code.

For Restaurants

Depending on the state, business operations, and payroll, workers’ comp for restaurants can range between $1,000 and $2,000 annually. Of course, this is just an average. Some states may have a base rate that you can pay. Additionally, you may have a history of claims that increases your experience mod. Overall, you can expect restaurant premiums to be lower.

The Bottom Line

Workers’ compensation insurance is a critical factor in keeping employees safe and ensuring the business survives the costs associated with inevitable accidents that happen while on the job.

The unfortunate reality is, there are people who target business owners with dishonest claims with the intent of fraud. Be aware that there are law firms dedicated to defending business owners in such cases. If your business is in California and in need of Workers’ Compensation Defense, Call EDG Law today.