Workers' comp insurance costs small businesses a median of $54 to $76 per month, and The Hartford reports a small business average of $86 per month, or $1,032 per year. Workers' comp is not billed at a flat rate. Insurers price it per $100 of payroll, multiplied by a class code rate for each type of job and an experience modification rate based on your claims history.
Below, we break down workers' comp costs by employee, industry, and state, walk through the exact formula insurers use, explain how state rules, premium audits, and business owner's policies affect the price, and list the steps that bring a workers' comp premium down.
How Much Does Workers' Comp Insurance Cost?
Workers' comp insurance costs most small businesses between $54 and $121 per month, depending on payroll, job types, and claims history. Insureon reports a median of $54 per month, or $643 per year, across its small business customers, and new Progressive Commercial customers paid a median of $76 per month in 2025. A workers' compensation insurance policy pays medical bills, lost wages, and disability benefits for employees hurt or sickened on the job, so its price tracks how many people you employ and how risky their work is.
Those national figures, along with The Hartford's small business average and starting price, set a clear range for small business budgets:
The averages in the table run higher than the medians because a small number of high-risk businesses, such as roofing and construction crews, pay far larger premiums and pull the average up. Insureon found that 47% of its customers pay less than $50 per month and another 24% pay between $50 and $100. The right budget for your business depends less on these national figures and more on your own payroll and job mix.
How Much Should I Pay for Workers' Comp Insurance?
You should pay roughly the class code rate for each job type multiplied by every $100 of payroll in that job type, adjusted by your experience mod. A small office with a few clerical employees pays near the bottom of the national range, while a five-person roofing or landscaping crew pays several thousand dollars a year.
The best benchmark is a quote built on your real payroll and job descriptions, compared across several carriers. Workers' comp rates are regulated by each state, but carriers still differ in how they classify work, what credits they apply, and which industries they want to insure. Cost per employee shows how payroll turns into premium.
How Much Does Workers' Comp Cost per Employee?
Workers' comp costs per employee range from about $120 per year for a low-risk employee to more than $1,600 per year for a high-risk employee earning the same wage. Sentry gives a sample base rate of $0.30 per $100 of payroll, which produces about $120 per year for an employee earning $40,000. The Hartford cites a 2026 Florida landscaping rate of $4.144 per $100 of payroll, which produces about $1,658 per year for an employee earning the same $40,000.
The same wage produces a premium nearly 14 times higher because the job carries far more injury risk. Payroll sets the size of the premium, and the job's class code sets the rate applied to that payroll, which is why industry matters so much.
How Much Does Workers' Comp Cost by Industry?
Workers' comp costs by industry follow injury risk, so office-based businesses pay the least and construction, roofing, logging, and electrical contractors pay the most. The Hartford lists police officers, firefighters, electrical contractors, lumberjacks, construction equipment operators, and telecommunications repair workers among the highest-risk jobs for workers' comp pricing.
Construction dominates the national workers' comp market. The National Council on Compensation Insurance (NCCI) reports that construction is the largest industry by premium volume, at 27% of the total. Accounting firms, consultants, and software companies sit at the opposite end, because desk work rarely produces serious injuries. Industry, payroll, and claims history all come together in one formula.
How Is Workers' Comp Insurance Calculated?
Workers' comp insurance is calculated by dividing payroll by 100, multiplying by the class code rate, and multiplying by the experience modification rate. The formula is: (Payroll ÷ $100) × Class Code Rate × Experience Mod = Premium. Insurers apply that formula to each job classification separately and add the results together.
- Split payroll by job type. Total the annual wages for each group of employees doing the same kind of work, such as office staff and field crew.
- Divide each payroll by 100. Workers' comp rates are stated per $100 of payroll, so $80,000 of payroll becomes 800 units.
- Multiply by the class code rate. Each job's four-digit class code carries a rate set from your state's loss data.
- Add the totals together. The sum of every class is your manual premium.
- Apply your experience mod. Multiply the manual premium by your experience modification rate to raise or lower the price based on past claims.
- Add credits, fees, and minimums. Carriers apply schedule credits, state assessments, and minimum premiums to reach the final price.
The Hartford's example shows the formula at work. A new Florida landscaping business with three employees earning $40,000 each has $120,000 of payroll, and at the $4.144 rate the estimated premium is $4.144 × 1,200 = $4,973 per year.
Mixed job types change the math. A business with one office manager earning $45,000 and two field employees earning $40,000 each pays about $135 for the office payroll at a $0.30 rate and about $3,315 for the field payroll at the $4.144 rate, for a total near $3,450. Classifying the office manager under the field code by mistake would add more than $1,700 to the bill, which is why class codes deserve close attention.
What Are Workers' Comp Class Codes?
Workers' comp class codes are four-digit numbers that group jobs by the type of work and its injury risk. NCCI maintains the class code system in most states, and states with their own rating bureaus use their own codes. Each code carries a rate per $100 of payroll that reflects the injury history of that job across the state.
Class codes apply to the work an employee actually does, not to a job title. A clerical employee who never visits job sites belongs in a clerical code, while an office manager who also runs equipment in the field may belong partly in a field code. The class code rate sets the starting price, and the experience mod adjusts it for your own record.
What Is an Experience Modification Rate?
An experience modification rate (EMR) is a number that compares your business's workers' comp claims history to other businesses of the same size in the same industry. An EMR of 1.00 represents the industry average, an EMR below 1.00 earns a discount, and an EMR above 1.00 adds a surcharge.
The experience mod multiplies the entire premium, so it moves the price fast. A business with a $10,000 manual premium pays $8,500 at an EMR of 0.85 and $12,500 at an EMR of 1.25. Rating bureaus calculate experience mods, all insurers in a state must apply them, and a business qualifies for one only after its premium reaches the state's eligibility threshold. Experience mods and class code rates both start with rules set at the state level.
How Much Does Workers' Comp Cost by State?
Workers' comp costs by state range from a median of $34 per month in Texas to $127 per month in the most expensive state, according to Insureon. Each state sets its own benefit levels, medical fee schedules, and rating rules, so the same business pays different prices in different states.
State medians reflect each state's mix of industries as much as its rules. A state with many construction, manufacturing, and logging businesses posts a higher median, even though a low-risk accounting firm there may pay less than the median. Alabama has the highest median in Insureon's data at $127 per month, and The Hartford reports an average issued premium of $1,448 per year in the state, compared with $576 in Texas.
Four states control the market entirely. North Dakota, Ohio, Washington, and Wyoming are monopolistic states, which means businesses must buy workers' comp from a state fund instead of a private carrier. Monopolistic state policies usually leave out employer's liability coverage, so businesses there buy it separately as stop gap coverage. State rules also decide the most basic cost question: whether you need the policy at all.
Is Workers' Comp Insurance Required?
Yes, workers' comp insurance is required in nearly every state once a business has employees, though the employee threshold varies by state. Most states require coverage at one employee. Alabama requires coverage once a business regularly employs five or more employees, and part-time employees, corporate officers, and LLC members all count toward that number.
Texas is the main exception, because Texas lets most private employers choose not to carry workers' comp coverage. Employers that opt out lose important legal protections and face employee injury lawsuits directly. Domestic workers, farm laborers, and casual employees are exempt from the requirement in many states.
A workers' comp policy comes in two parts. Part One pays the benefits state law requires, including medical care and lost wages. Part Two is employer's liability coverage, which pays legal defense and damages when an employee injury leads to a lawsuit outside the workers' comp system, a gap that general liability insurance does not fill because it excludes employee injuries. Many owners assume this coverage comes inside their business package, which is a common and costly mistake.
Is Workers' Comp Part of a Business Owner's Policy?
No, workers' comp is not part of a business owner's policy. A business owner's policy (BOP) combines commercial property and general liability coverage, and workers' comp is always a separate policy because each state regulates it separately.
The BOP's liability portion, general liability, covers injuries to customers and visitors but excludes injuries to your own employees. A customer who slips in your store is a general liability claim, while an employee who slips in the same spot is a workers' comp claim.
The BOP's other half, commercial property coverage, protects your building and equipment, but it pays nothing for an employee's medical bills or lost wages.
Workers' comp still fits into a package strategy. Bundling policies with one carrier, such as a BOP and a workers' comp policy, often earns a multi-policy discount and simplifies renewals. The price you pay at the start of the policy, however, is only an estimate until the year ends.
How Do Premium Audits Change Your Workers' Comp Cost?
Premium audits change your workers' comp cost by replacing the estimated payroll used at the start of the policy with your actual payroll at the end of the year. A business that hired more workers than it estimated owes an additional premium, and a business that paid less payroll than estimated receives a refund or credit.
Audits also review job classifications and subcontractors. Auditors check whether employees were placed in the right class codes, and they often add the payroll of subcontractors who cannot show their own certificate of workers' comp insurance. Uninsured subcontractors and misclassified workers are among the most common coverage gaps that turn into surprise audit bills.
Pay-as-you-go billing reduces audit surprises. Under a pay-as-you-go plan, the premium is calculated from actual payroll every pay period, so there is no large down payment and little difference to settle at audit time. Accurate payroll and classifications are the first of several ways to lower the bill.
How Can You Make Workers' Comp Cheaper?
You can make workers' comp cheaper by preventing injuries, classifying employees correctly, returning injured workers to light duty quickly, paying as you go, and comparing quotes from several carriers. Fewer and smaller claims lower your experience mod, and the experience mod multiplies every dollar of premium.
- Build a safety program: Train employees on safe lifting, equipment use, and hazard reporting, and supply proper gear and footwear.
- Classify every employee correctly: Place each worker in the class code that matches the work they actually do.
- Start a return-to-work program: Offer light or modified duty so injured employees return sooner and claim costs stay smaller.
- Collect certificates from subcontractors: Keep proof of workers' comp for every subcontractor to avoid added audit premium.
- Use pay-as-you-go billing: Match premium to actual payroll and avoid a large down payment.
- Compare carriers every renewal: Carriers apply different credits and target different industries, so the same business receives different quotes.
Some states also offer deductible plans for workers' comp, where the business repays the carrier for a set amount of each claim in exchange for a lower premium. A higher deductible only makes sense for a business with cash to cover several small claims in a year.
The market currently favors buyers. NCCI's 2026 State of the Line report shows a 2025 combined ratio of 91, the 12th consecutive year below 100, which signals steady insurer profits, and most states have been lowering employer rates. Lost-time claim frequency fell 2% in 2025, while medical claim severity rose 4%, which keeps safety programs valuable.
The cheapest workers' comp insurance comes from the carrier that classifies and credits your business most accurately, and no single carrier is cheapest for every industry. We see employers save the most by having their payroll split correctly across class codes and quoted with several carriers at once. Shopping your workers' comp policy each renewal keeps the price aligned with your current payroll and safety record.
Frequently Asked Questions
Can You Buy Your Own Workers' Comp Insurance?
Yes, you can buy your own workers' comp insurance as a sole proprietor or independent contractor in most states, even when the law does not require it. Many general contractors and clients require subcontractors to show their own workers' comp certificate before work begins. A policy that covers only the owner also pays medical bills and lost wages when the owner is hurt on the job.
What Will Workers' Comp Not Cover?
Workers' comp will not cover injuries caused by intoxication or drug use, self-inflicted injuries, injuries from horseplay or fighting, injuries during a normal commute, or injuries to independent contractors. It also does not pay pain and suffering damages or cover damage to business vehicles, which belongs on a commercial auto policy.
Who Pays for Workers' Comp Insurance?
Employers pay for workers' comp insurance. The business pays the full premium to a private carrier or, in monopolistic states, to the state fund, and most states prohibit charging employees for the cost of coverage.
What Is a Minimum Premium Workers' Comp Policy?
A minimum premium workers' comp policy is the lowest-priced policy a carrier will write, used by very small businesses with low payroll. It satisfies the legal requirement and provides a certificate of insurance at the carrier's minimum charge. Some states also allow ghost policies, which provide a certificate but no actual coverage for workers.
Does Workers' Comp Cover the Business Owner?
Workers' comp covers the business owner when the owner is included on the policy, which depends on the business structure and the state. Sole proprietors and partners are usually excluded unless they elect coverage, while corporate officers and LLC members often count as employees and must file an exemption form to exclude themselves.
The Bottom Line
Workers' comp insurance costs small businesses a median of $54 to $76 per month, but every policy is priced from the same formula: payroll divided by 100, multiplied by each job's class code rate and by the experience mod. Job risk drives the largest differences, state rules set the base rates and requirements, and premium audits settle the final cost at year end. Safety programs, accurate classifications, return-to-work plans, and yearly carrier comparisons keep the premium as low as your payroll allows.
Getting class codes and payroll right across several carriers is exactly the work we do every day at UR Choice Insurance. Whenever you want to see what workers' comp would cost for your team, a free quote takes about five minutes to start.