How Much Does Workers’ Compensation Insurance Cost?

Small businesses pay an average of $81 per month for workers’ compensation insurance. That’s $972 annually to protect your employees and your business from workplace injuries.

But your actual cost depends on what your employees do and where you do business. A software company in Irvine, California, pays different rates than a construction crew in Phoenix—even with identical payrolls.

Many policyholders pay around $81 monthly, while some policies start as low as $13 per month. Making Workers’ Compensation protection a smart buy when you consider the average workers’ compensation claim costs $40,051.

Fast Fact: The National Academy of Social Insurance estimates the average U.S. workers’ comp cost at $1.19 per $100 of payroll, though rates vary dramatically by industry and location.

What Determines the Cost of Workers’ Compensation Insurance?

Your workers’ compensation cost reflects one simple principle: risk equals price. Insurance companies use decades of claims data to calculate premiums. More dangerous work costs more to insure.

Class Code & Industry Type

Your industry classification drives your base rate—the biggest factor in workers’ compensation cost.

Office workers typically pay $0.30 to $0.60 per $100 of payroll. Construction workers might pay $5.00 to $12.00 per $100 of payroll. According to Bureau of Labor Statistics data, construction companies pay 4.4% of payroll for workers’ comp versus the national average of 1.6%.

Why such a difference? Claims data doesn’t lie. Truck drivers have the highest rate of workers’ compensation claims in many states, while office workers rarely get injured on the job.

Many businesses have multiple classification codes. Restaurants classify kitchen staff under higher-rated food service codes while office employees fall under lower clerical rates.

Payroll Size

Workers’ compensation operates on a rate-per-payroll model. Your cost is calculated per $100 of payroll, so larger payrolls mean higher premiums.

But “payroll” for insurance purposes isn’t your standard payroll calculation. Overtime counts. Tips count in tipping industries. Group health premiums typically don’t count. Most states cap executive salaries at around $150,000 for rating purposes.

Location & State Laws

State laws dramatically affect workers’ compensation cost. Workers’ comp rates vary greatly from state to state due to different laws, medical fee schedules, and coverage requirements.

Some states like North Dakota, Ohio, Wyoming and Washington require businesses to buy coverage through state funds rather than private insurance. These monopolistic states set their own rates—you can’t shop around.

Claims History & Experience Modifier

Your experience modifier adjusts workers’ compensation cost based on your safety record compared to similar businesses.

Average claims experience equals a 1.00 modifier. Better-than-average claims history generates a modifier below 1.00, while worse-than-average history creates a modifier above 1.00.

The modifier typically applies once annual premiums exceed $5,000. For qualifying businesses, it can change premiums by 25% or more.

Travelers data shows 28% of injured employees had been on the job for a year or less, making proper training crucial for new hires.

Carrier Selection & Underwriting

Not all insurance companies price workers’ compensation the same way, even when state regulations require identical base rates.

Key differences between carriers include:

• Industry specialization – Some carriers focus on specific industries and offer better rates for their target markets
• Financial strength ratings – A+ rated carriers provide stability but may cost more than lower-rated competitors
• Claims service quality – Faster claim resolution and better medical networks reduce overall costs
• Underwriting appetite – Some carriers actively seek certain business types, while others avoid them
• Technology and services – Advanced claims management and safety resources can impact long-term costs
• Geographic presence – Regional carriers may offer better rates in specific states than national companies

Understanding the Workers’ Compensation Premium Formula

Workers’ compensation pricing follows a standard formula:

Premium = (Payroll ÷ 100) × Class Rate × Experience Mod × Credits/Surcharges

Base Rate Example

A restaurant with $500,000 annual payroll illustrates how this works:

• Kitchen staff: $300,000 payroll × $4.50 per $100 = $13,500
• Office staff: $200,000 payroll × $0.45 per $100 = $900
• Base premium: $14,400

Experience Modifier Impact

Good claims experience (0.85 modifier) reduces this premium to $12,240—saving $2,160.

Poor claims experience (1.15 modifier) increases the premium to $16,560—costing an extra $2,160.

The difference between good and poor safety records: $4,320 annually for this small restaurant.

Safety Program Benefits

Safety programs can earn discounts of 5% to 15% with many carriers. A 10% safety discount saves $1,224 to $1,656 on our restaurant example.

Travelers’ Early Severity Predictor program led to up to 50% savings on claims involving chronic pain.

Average Workers’ Comp Rates by Industry

These ranges help you benchmark your workers’ compensation cost. Remember: your actual rate depends on your specific situation and state.

Low-Risk Industries:

• Clerical/Office Work: $0.30–$0.60 per $100 payroll
• Software Development: $0.40–$0.80 per $100 payroll
• Accounting Services: $0.35–$0.65 per $100 payroll

Example: $500,000 payroll = $1,500–$4,000 annual premium

Medium-Risk Industries:

• Restaurants: $2.50–$4.00 per $100 payroll
• Retail Stores: $1.50–$3.00 per $100 payroll
• Light Manufacturing: $2.00–$5.00 per $100 payroll

Example: $500,000 payroll = $7,500–$25,000 annual premium

High-Risk Industries:

• Construction: $5.00–$12.00 per $100 payroll
• Roofing: $8.00–$18.00 per $100 payroll
• Trucking: $4.00–$10.00 per $100 payroll

Example: $500,000 payroll = $20,000–$90,000 annual premium

According to industry data, the national median workers’ compensation cost is $1.85 per $100 of payroll, though this varies significantly by industry risk level.

How to Lower Your Workers’ Comp Premiums

Smart business owners don’t accept their workers’ compensation cost—they manage it.

• Invest in Safety Training Prioritizing workplace safety can help lower claim submissions and qualify for premium discounts. Every dollar spent on safety saves multiples in workers’ compensation cost.
• Return Injured Workers to Light Duty Modified duty programs reduce overall claim costs and help employees return to work sooner. This single strategy often provides the highest return on investment.
• Consider Pay-As-You-Go Programs Pay-as-you-go workers’ comp bases premiums on actual payroll rather than estimates, reducing upfront costs and eliminating audit surprises.
• Bundle Your Policies Bundling workers’ compensation with general liability or other business insurance can help you save on both policies.
• Maintain Accurate Classifications Review class codes annually with your insurance professional. Business operations change, and proper classification prevents overpaying for unnecessary coverage.

Why Choose IronPoint for Workers’ Comp

The right workers’ compensation coverage protects your employees and your business without costing more than necessary.

What we do for you:

• Work with top-rated carriers to secure competitive rates
• Help you implement safety strategies that keep costs under control
• Guide you through claims to minimize impact on your experience modifier
• Properly classify your business to avoid overpaying
• Identify available discounts and cost-saving opportunities
• Structure coverage that delivers real value for your industry

Because the best workers’ compensation policy protects what matters most while costing what it should—nothing more, nothing less.