How Much Does Workers Compensation Insurance Cost?

If you have employees, you already know you need to protect them. At some point, usually right after you hire your first person, this question pops into your head:

“How much does workers compensation insurance actually cost?”

You might search around and see a few numbers that seem all over the place. Some sites say 45 dollars per month. Others talk about 1 dollar per 100 dollars of payroll. Others show scary numbers for construction, trucking or manufacturing. It can feel confusing very quickly.

In reality, workers compensation insurance cost is built on a clear formula. The price is not random. It is based on:

• What kind of work your employees do
• How much you pay them
• Where your business operates
• Your history of work injuries and claims

In this long guide for Savon Insurance Brokerage and readers of savonusa.com, we will walk through:

• Typical workers comp cost ranges
• The formula carriers use to calculate your premium
• Real world examples for different types of businesses
• Factors that push your cost up or down
• How to estimate your own workers compensation cost
• How Savon can help you keep that cost under control

Think of this as a calm, direct talk with a smart friend who happens to understand insurance.

 

Quick Answer: What Does Workers Compensation Insurance Usually Cost?

Let us start with the short version before we dive into the details.

Several recent sources give useful averages:

• The National Academy of Social Insurance puts the national average workers comp cost at about 1 dollar per 100 dollars of payroll.
• A recent breakdown notes that small businesses pay about 45 dollars per month per employee on average, or around 540 dollars per year, though this varies a lot by state and industry.
• One carrier reports that most of its very small customers pay under 150 dollars per month, with a median around 92 dollars per month, but again this depends heavily on risk level and payroll.
• Another insurer shows its own small business customers averaging about 80 to 90 dollars per month for workers comp when annual payroll is under 300,000 dollars.

Those numbers are helpful as a rough starting point, but they are only part of the story.

A low risk office with three employees might pay:

• A few hundred to perhaps a thousand dollars per year total.

A small construction company with crews on roofs and job sites could easily pay:

• Several thousand to tens of thousands of dollars per year, even with a similar number of employees.

So the honest answer to “how much does workers compensation insurance cost” is:

It usually starts around a few hundred dollars per year for very small, low risk businesses and goes up from there based on your payroll, industry and claims history.

To understand where your business might land, you need to see how the math works.

 

The Basic Formula Behind Workers Compensation Cost

Almost every reputable guide explains workers comp premium with a simple formula. The wording changes a little, but the structure is the same.

A common version looks like this:

Workers comp premium
= Classification rate × (Payroll ÷ 100) × Experience modification factor × Other adjustments

Let us translate that into normal language.

1. Classification rate

Every job type is assigned a class code and a rate per 100 dollars of payroll.

• Low risk work like clerical office jobs has a low rate.
• Higher risk jobs like roofing, trucking or heavy construction have much higher rates.

These rates are based on years of injury and claim data collected by organizations such as NCCI and state rating bureaus.

2. Payroll

Workers comp cost is tied directly to how much you pay your employees.

• Carriers take your payroll for each class code
• They divide by 100
• Then multiply by the rate for that class

So more payroll means more exposure to injury and a higher premium. State guides say this very clearly: your premium is directly related to your payroll because more payroll usually means more employees to cover.

3. Experience modification factor (mod)

If your business is big enough to be “experience rated,” a factor called the experience mod is applied.

• If your claims history is better than average for your industry, your mod is less than 1.0 and you pay less.
• If your history is worse, your mod is greater than 1.0 and you pay more.

Guides from NCCI and other experts explain that the mod compares your actual losses to expected losses, then adjusts your premium up or down accordingly.

4. Other adjustments

Finally, carriers may apply:

• Schedule credits or debits based on safety and individual risk features
• Premium discounts for larger policies
• State assessments and fees

These do not change the basic formula, but they tweak the final price.

Once you understand this structure, “how much does workers compensation insurance cost” stops feeling like a mystery and starts to feel like something you can actually work with.

 

Average Workers Compensation Cost: What The Numbers Look Like In Practice

The averages we saw earlier are helpful, but they are easier to grasp with real examples.

National averages per 100 dollars of payroll

Several recent summaries put the national average cost of workers compensation around 1 dollar per 100 dollars of payroll.

In other words:

• If your total payroll is 200,000 dollars, a very rough national average premium would be around 2,000 dollars per year.
• If your total payroll is 500,000 dollars, a rough average would be around 5,000 dollars per year.

This is not what every business pays, but it gives a sense of the scale.

Average cost by state

Costs change a lot depending on where you are. Workers comp cost per 100 dollars of payroll can be quite different from state to state.

One breakdown of state level averages shows examples like:

• California around 1.45 dollars per 100 dollars of payroll
• New York around 1.29 dollars per 100 dollars of payroll
• Texas around 0.46 dollars per 100 dollars of payroll
• Florida around 0.99 dollars per 100 dollars of payroll

A Washington state update reported an average of about 1.53 dollars per 100 dollars of payroll for 2022.

These differences reflect each state’s:

• Benefit rules
• Claim trends
• Regulatory environment
• Mix of industries

So two identical companies in different states can pay very different workers compensation costs.

Average cost by industry

Industry type probably has the biggest impact of all.

Several recent analyses show:

• For low risk professional services and office based work, average workers comp cost per employee is often in the 40 to 50 dollars per month range.
• For higher risk industries such as construction, average monthly costs can be several hundred dollars per employee. One breakdown shows construction averages around 250 to 340 dollars per month per business, depending on risk level and claims.

You can think of it this way:

A software firm with ten employees might spend less on workers comp than a small roofing crew with four workers, even if the software firm has a bigger payroll.

That is why Savon Insurance Brokerage always starts by asking what you actually do before talking numbers. Without that context, any price is just a guess.

 

What Really Drives Workers Compensation Insurance Cost?

When we talk about “how much does workers compensation insurance cost,” we are really asking:

“What are the levers that change this price for my business?”

Let us walk through the big ones.

1. Your industry and job risk level

First and most important is what kind of work your employees do.

• Office staff, accountants and designers have lower risk of serious injury.
• Roofers, loggers, truck drivers and heavy construction workers face much higher risk.

Class code systems and major guides show huge differences in rates between low risk and high risk codes. For example, one summary notes that low risk jobs such as office work in California might cost around 0.40 dollars per 100 dollars of payroll, while some high risk jobs can cost more than 30 dollars per 100 dollars of payroll.

That is a huge gap.

You cannot change your industry, but you can:

• Make sure your classification is correct
• Separate clerical, outside sales and other low risk staff into their proper codes where allowed
• Avoid using a high risk umbrella code for everyone when only some roles need it

2. Your payroll and number of employees

Workers comp is directly tied to payroll. State resources emphasize that more payroll usually means more employees and more exposure, so premium scales accordingly.

If your payroll doubles:

• Your workers compensation insurance cost will roughly double too, assuming risk levels and other factors stay the same.

This makes workers comp relatively predictable as you grow, which is helpful for planning.

3. Your location

We saw earlier that state averages range widely. One summary gives examples from about 0.46 dollars per 100 dollars of payroll in Texas up to more than 1.80 dollars per 100 dollars of payroll in Wyoming.

These differences come from:

• State benefit requirements
• Legal environment
• Claim frequency and severity
• State specific assessments and fees

If you operate in more than one state, you may have different rates for the same type of job depending on where each employee works.

4. Your experience modification factor (claims history)

If your business is large enough to have an experience mod, your claims history becomes a powerful lever.

A 2024 advisory explains that the experience mod has a direct impact on workers comp premium and that it rewards employers with fewer and less severe claims compared to their peers.

Simple example:

• Mod 1.00: you pay the base premium
• Mod 0.80: you pay 20 percent less
• Mod 1.25: you pay 25 percent more

So if your unmodified premium is 10,000 dollars:

• At mod 0.80, you pay 8,000 dollars
• At mod 1.25, you pay 12,500 dollars

That is a 4,500 dollar swing from safety and claim management alone.

5. Safety programs and underwriting judgment

Beyond the raw numbers, insurers look at how you manage safety. A carrier might offer schedule rating credits if you can show:

• Written safety policies
• Regular training
• Good housekeeping and maintenance
• Use of guards, fall protection and personal protective equipment
• Strong return to work programs

Carriers and rating plans describe schedule rating as a way to adjust premium for these individual risk characteristics, within set limits.

So good safety practice does not just prevent injuries. It can also help you get better pricing today.

6. Coverage choices and deductibles

Workers comp is more standardized than many other business policies, but there are still some choices that affect cost:

• Higher deductibles or retentions for large employers
• State fund vs private carrier in some jurisdictions
• Optional endorsements or coverage extensions

These are usually fine tuning rather than major cost drivers for small businesses, but they still matter.

 

Real World Examples: How Workers Comp Cost Works For Different Businesses

To make all this more concrete, let us walk through some simple examples. Keep in mind that these are illustrations, not quotes.

Several business insurance guides use similar examples to explain the math.

Example 1: Small office based business

• Type of work: Professional services, mostly clerical and consulting
• Location: State with average rates
• Employees: 5 office workers
• Total annual payroll: 300,000 dollars
• Class rate: 0.50 dollars per 100 dollars of payroll (for a low risk office class)
• Experience mod: 1.00 (new business or average history)

Calculation:

• Payroll ÷ 100 = 300,000 ÷ 100 = 3,000
• Base premium = 3,000 × 0.50 = 1,500 dollars
• Mod 1.00, so still 1,500 dollars before other small adjustments

So a low risk office with 300,000 dollars payroll might see workers compensation insurance cost in the low thousands per year. This lines up well with office examples in published guides.

Example 2: Small construction company

• Type of work: Construction with field crews
• Location: State with mid range rates
• Employees: Mix of tradespeople and a part time office manager
• Total annual payroll: 500,000 dollars
• Class rate for field crews: 8.00 dollars per 100 dollars of payroll (higher risk)
• Class rate for office: 0.50 dollars per 100 dollars
• Payroll: 450,000 field, 50,000 office
• Experience mod: 1.25 (worse than average claims)

Calculation:

Field payroll:

• 450,000 ÷ 100 = 4,500
• 4,500 × 8.00 = 36,000 dollars

Office payroll:

• 50,000 ÷ 100 = 500
• 500 × 0.50 = 250 dollars

Total manual premium:

• 36,000 + 250 = 36,250 dollars

Apply mod 1.25:

• 36,250 × 1.25 = 45,312.50 dollars

So this small construction company could pay around 45,000 dollars per year in workers comp, mostly driven by:

• High risk work
• Large field payroll
• Above average claims

This matches the kind of difference seen in industry comparisons, where construction premiums are many times higher than office work.

Example 3: Retail business with a modest payroll

• Type: Retail shop
• Location: Mid cost state
• Employees: 4 full time, 2 part time
• Annual payroll: 200,000 dollars
• Class rate for retail: 1.20 dollars per 100 dollars
• Experience mod: 0.90 (better than average history)

Calculation:

• 200,000 ÷ 100 = 2,000
• 2,000 × 1.20 = 2,400 dollars manual premium
• 2,400 × 0.90 = 2,160 dollars adjusted premium

So this retail business might pay just over 2,000 dollars per year for workers comp, which fits with published ranges for small low to medium risk businesses.

These examples are only rough, but they show how the same formula produces very different workers compensation insurance costs depending on your situation.

 

How To Estimate Your Own Workers Compensation Insurance Cost

You do not need an exact quote to get a ballpark sense of your cost. You can use a simple step by step approach, then refine it with help from Savon.

Several carriers and state agencies publish the same basic steps.

Step 1: List your employees and job types

Write down:

• Each job role in your company
• Whether it is mostly office, mostly field, driving, or something else
• How many people are in each type of role

This will help match your people to class codes later.

Step 2: Add up annual payroll by job type

Estimate what you will pay over the next 12 months:

• Wages and salaries
• Expected overtime
• Bonuses where applicable

Group the totals by job type, for example:

• Clerical / office: 120,000 dollars
• Retail floor staff: 180,000 dollars
• Drivers: 80,000 dollars

You do not need to be perfect. Use your best realistic estimate.

Step 3: Get rough class rates for your state and industry

Online calculators and cost guides often list sample rates by risk level or by state, though actual rates come from carriers and rating bureaus.

For a rough estimate you can:

• Use 0.40 to 0.80 dollars per 100 dollars of payroll for very low risk office roles
• Use 1 to 2 dollars for medium risk retail or light service
• Use higher numbers for heavy manual work or construction, often several dollars per 100 dollars of payroll or more, depending on your state

Savon can help you plug in more accurate class rates once you reach out for a real quote.

Step 4: Do the math

For each job group:

1. Divide payroll by 100
2. Multiply by a reasonable class rate for that type of work
3. Add the numbers for all job groups

If you know your experience mod, multiply the total by that number. If you do not have a mod yet or are very small, assume 1.0.

This will give you a rough estimated annual premium. It will not be perfect, but it will be close enough to plan around.

Step 5: Compare your estimate with a real quote

Once you have a ballpark number, you can:

• Share it with Savon Insurance Brokerage
• Let them check your class codes, rates and mod
• See quotes from several carriers

Often, the number you had in your head and the number from the market will not be too far apart once everything is done correctly. If there is a big difference, it is usually because:

• Class codes were different than you expected
• Payroll estimates were off
• Your state rates or experience mod push the price up or down

Either way, you will understand why, instead of just feeling surprised.

 

Why Workers Compensation Insurance Cost Is Not “Set It And Forget It”

Your workers comp price is not something you set once and ignore forever. A few reasons:

1. Payroll changes during the year

If your:

• Staff grows
• Pay rises
• Mix of roles changes

your exposure changes too. Since workers comp is based on actual payroll, this will be corrected at audit time.

If you expect big changes, it is often better to tell your broker and adjust the policy during the year rather than get a surprise bill later.

2. Your experience mod updates every year

Experience mods are usually updated annually using a rolling three year loss history. Each year:

• Old claim years drop off
• New ones come in
• Your mod goes up, down or stays roughly the same

So a good claim year can help reduce your cost in future years. A bad year can push it up.

3. State rates and market conditions change

Regulators and rating bureaus review data and adjust base workers comp rates over time. For example, Washington state announced an increase to 1.53 dollars per 100 dollars of payroll in 2022, and other states publish similar updates regularly.

Some years bring rate decreases, some bring increases. Your cost will reflect those changes even if your own payroll and claims stay steady.

Because of these moving parts, it is smart to review workers comp at least annually with your broker instead of letting it renew on autopilot.

 

How To Control Workers Compensation Insurance Cost Over Time

You cannot fully control the cost of workers compensation insurance, but you can influence it.

Here are some practical steps that matter.

Focus on safety and claim prevention

This sounds obvious, but it is the most powerful lever over time.

Expert articles and loss data from NCCI and others show that average claim costs are significant. Recent figures suggest that the average cost for all workers compensation claims combined for recent accident years was over 47,000 dollars.

Fewer injuries mean:

• Lower claim costs
• Better experience mod
• Lower future premiums

Useful actions include:

• Regular safety training tailored to your work
• Clear procedures for high risk tasks
• Proper use of guards, ladders, fall protection and PPE
• Clean, organized work areas
• Reporting and fixing hazards quickly

Most insurers who work with Savon offer free safety resources and training materials. Using those is one of the best ways to bend your cost curve down.

Build a good injury reporting and return to work process

How you handle injuries affects:

• Claim size
• Length of time off work
• Your experience mod

Early reporting and active claim management help reduce both medical costs and wage replacement costs. Guides on experience rating explain that claim frequency and smaller claims carry a lot of weight in the mod calculation, so controlling both matters.

If you can:

• Encourage workers to report injuries right away
• Have a preferred medical provider or clinic
• Offer light duty or modified work when appropriate

you will often see better outcomes and lower long term workers comp cost.

Keep classification and payroll accurate

We talked earlier about class codes and payroll estimates. Keeping those accurate will:

• Reduce surprises at audit
• Prevent overpaying due to misclassification
• Avoid back bills due to underestimation

State and carrier guides stress that correct classification is central to fair workers comp pricing.

Work with an independent broker like Savon

An independent agency such as Savon Insurance Brokerage can:

• Shop your workers comp coverage with multiple insurers
• Help you understand and, where appropriate, improve schedule rating factors
• Review your experience mod and loss runs for errors or anomalies
• Suggest carrier programs, training and tools that can reduce injuries and costs

Instead of treating workers comp as a bill you cannot do anything about, Savon helps you turn it into a risk you can manage thoughtfully.

 

How Savon Insurance Brokerage Fits Into The Picture

You do not have to master all the technical pieces we just went through. That is what a broker is for.

As a virtual, independent insurance brokerage, Savon works with multiple insurance companies and focuses on finding coverage that fits real small and mid sized businesses, not just big corporations.

When you come to Savon and ask “how much does workers compensation insurance cost for my business,” they will help you by:

• Asking what your business does and where your employees work
• Reviewing your payroll and job roles
• Matching your roles to correct workers comp class codes
• Using up to date class rates for your state
• Checking whether you have an experience mod and what it means
• Getting quotes from several insurers instead of just one
• Explaining each quote in simple terms so you see why the prices differ

Once your policy is in place, Savon can also:

• Help you prepare for audits
• Review audit results and challenge errors when needed
• Walk you through loss reports and claim trends
• Connect you with carrier safety programs that can lower your long term risk and cost

The goal is not just a cheaper policy. The goal is a workers compensation program that:

• Meets legal requirements
• Treats your employees fairly when injuries happen
• Fits your budget
• Improves over time as your safety record improves

 

Frequently Asked Questions About Workers Compensation Insurance Cost

Is workers comp cost based on each employee or total payroll?

Workers comp cost is based on total payroll by class code, not a flat fee per employee. Many articles convert this into an average per employee for convenience, but the real calculation uses payroll divided by 100 and multiplied by class rates.

Why do I see “1 dollar per 100 dollars of payroll” everywhere?

That figure is a national average across all industries and states. It comes from data compiled by the National Academy of Social Insurance. Real rates in your state and industry may be much lower or much higher.

Can I lower my workers comp cost by calling workers contractors instead of employees?

Trying to avoid workers comp by misclassifying workers as independent contractors is risky. If the state or a court decides they are employees, you can face back premiums, penalties and possible liability for injuries. Proper classification should be based on how the work is actually done, not just what you call it.

Why did my workers comp cost jump even though we had no claims last year?

There are a few possible reasons:

• Your payroll increased
• Your state base rates changed
• Older bad claim years still affect your experience mod
• Your insurer adjusted their rating factors or schedule rating

Your broker can review your policy and mod worksheet to show you exactly what changed.

Does every business have an experience mod?

No. Very small businesses might be too small to qualify for experience rating under state or NCCI rules. In that case, they are often treated as if their mod is 1.0. Once payroll and premium cross a certain size threshold, a mod is calculated and begins to affect cost.

 

Final Thoughts: Turning Workers Comp Cost Into A Managed Expense

Workers compensation insurance cost can feel confusing until you see the structure behind it. Once you do, it becomes much easier to answer the question:

“How much will workers compensation cost my business, and what can I do about it?”

The core ideas are simple:

• It is mostly based on your industry, your payroll and your claims history
• The formula is clear and consistent
• Your choices about safety, reporting and classification have a real impact over time

If you want to move beyond rough averages and find out what workers comp should cost for your business, the next step is straightforward:

Connect with Savon Insurance Brokerage, share what your company does, and let them walk you through real quotes, in plain language, with no pressure.

You will not just get a number. You will understand why that number makes sense and what you can do to keep it under control as your business grows.