How is workers' compensation cost calculated?

Premiums are quoted as a dollar rate per $100 of payroll, multiplied by your annual payroll in each job classification. For example, a $1.00 rate on a $75,000 salary is ($75,000 / 100) x $1.00 = $750 a year. Your experience modifier (claims history) then adjusts the premium up or down.

How much does workers' comp cost per employee?

It depends almost entirely on the job's risk class. A desk role can cost well under $1 per $100 of payroll (a few hundred dollars a year), while construction or roofing can run $5 to $20+ per $100 (thousands per worker). Office-heavy businesses pay far less than trades or manufacturing.

Which states run their own workers' comp fund?

A few states require coverage through a state-run monopoly fund rather than private insurers: North Dakota, Ohio, Washington, and Wyoming. In those states you cannot shop private carriers for a lower rate, so the published state fund rate is your cost.

Do I owe workers' comp on a 1099 contractor?

Generally no, for a genuine independent contractor. But if a worker is misclassified and should be a W-2 employee, the business can be liable for the workers' comp coverage that was never carried, which is one of the largest hidden costs of misclassification.

Guide · 2026

Workers' compensation cost for employers

Workers' compensation is mandatory in almost every state and is one of the more variable parts of the cost of a hire. What you pay depends overwhelmingly on the job's risk, not the salary. Here is how it is priced and how to estimate it.

How premiums are priced

Workers' comp is quoted as a rate per $100 of payroll, set for each job classification, then adjusted by your experience modifier (a factor based on your claims history). The formula is simple:

premium = (annual payroll / 100) x class rate x experience modifier

See workers' compensation in the glossary for the basics.

Typical rates by job class

Rates vary by state and insurer, but the spread by risk is dramatic. Approximate ranges per $100 of payroll, and the resulting cost on a $75,000 salary:

Approximate workers' comp rates by job class
Job class	Rate / $100	On $75k
Clerical / office	$0.10 – $0.40	$75 – $300
Retail / sales	$0.50 – $1.50	$375 – $1,125
Warehouse / light industrial	$1.50 – $4.00	$1,125 – $3,000
Construction / roofing	$5.00 – $20.00+	$3,750 – $15,000+

Illustrative ranges · actual rates set by state rating bureaus and insurers · 2026

Monopoly states

In four states, coverage must be bought from a state-run fund rather than a private insurer: North Dakota, Ohio, Washington, and Wyoming. There is no carrier shopping in those states, so the state fund rate for your class is your cost. Everywhere else you can compare private quotes.

Estimating it for a hire

Workers' comp is one line in the fully-loaded cost of an employee. The cost to hire calculator and the hiring cost calculator both let you set your own per-$100 rate, so you can model the exact premium for your job class alongside payroll taxes and benefits. To see how it fits the bigger picture, read how to calculate the labor burden rate.

FAQ

How is workers' compensation cost calculated?: Premiums are quoted as a dollar rate per $100 of payroll, multiplied by your annual payroll in each job classification. For example, a $1.00 rate on a $75,000 salary is ($75,000 / 100) x $1.00 = $750 a year. Your experience modifier (claims history) then adjusts the premium up or down.
How much does workers' comp cost per employee?: It depends almost entirely on the job's risk class. A desk role can cost well under $1 per $100 of payroll (a few hundred dollars a year), while construction or roofing can run $5 to $20+ per $100 (thousands per worker). Office-heavy businesses pay far less than trades or manufacturing.
Which states run their own workers' comp fund?: A few states require coverage through a state-run monopoly fund rather than private insurers: North Dakota, Ohio, Washington, and Wyoming. In those states you cannot shop private carriers for a lower rate, so the published state fund rate is your cost.
Do I owe workers' comp on a 1099 contractor?: Generally no, for a genuine independent contractor. But if a worker is misclassified and should be a W-2 employee, the business can be liable for the workers' comp coverage that was never carried, which is one of the largest hidden costs of misclassification.