Average Cost
| Business Size | Average Annual Cost | Average Monthly Cost |
|---|---|---|
| 1–5 employees | $1,000 – $3,000 | $85 – $250 |
| 5–20 employees | $3,000 – $10,000 | $250 – $835 |
| 20–50 employees | $10,000 – $30,000+ | $835 – $2,500+ |
Most small businesses pay around $500–$3,000/year depending on industry and payroll size.
How Workers’ Comp Cost Is Calculated
The standard formula insurers use:
(Payroll ÷ 100) × Class Code Rate × Experience Modifier = Annual Premium
Example:
$200,000 payroll ÷ 100 = 2,000
× Rate of $1.50 (office workers) = $3,000/year
Key Cost Factors
Industry & Job Type (Class Code)
This is the biggest factor. High-risk jobs cost far more to insure:
| Industry | Approximate Rate per $100 Payroll |
|---|---|
| Office / Clerical | $0.20 – $0.50 |
| Retail | $0.80 – $1.50 |
| Restaurant / Food Service | $1.50 – $3.00 |
| Landscaping | $5.00 – $10.00 |
| Roofing / Construction | $10.00 – $30.00+ |
| Logging / Forestry | $20.00 – $40.00+ |
Total Payroll
Higher payroll = higher premium. Rates are calculated per $100 of payroll.
Experience Modifier (EMR)
Starts at 1.0 for new businesses
Goes below 1.0 (discount) with a clean safety record
Goes above 1.0 (surcharge) after workplace accidents
State
Workers’ comp is state-regulated, so rates vary significantly by location. Some states (WA, ND, OH, WY) require buying from a state-run fund.
Number of Claims
More past claims = higher premiums. A single serious injury can raise your rates for years.
What Workers’ Comp Covers
| Coverage | What It Pays |
|---|---|
| Medical expenses | Doctor visits, surgery, medication for work injuries |
| Lost wages | Partial income replacement while employee recovers |
| Disability benefits | Short or long-term disability from a work injury |
| Rehabilitation costs | Physical therapy, retraining |
| Death benefits | Funeral costs + support for dependents |
| Employer liability | Legal costs if an employee sues |
Is It Required?
Almost always yes. Most U.S. states require workers’ comp if you have 1 or more employees (some states say 3–5).
| State Requirement | States |
|---|---|
| 1+ employee | CA, NY, FL, TX (voluntary), most others |
| 3–4 employees | AL, AR, GA, NC, SC, VA |
| 5 employees | MS, MO, TN |
| Not required (voluntary) | TX |
Operating without required coverage can result in heavy fines, lawsuits, and criminal charges.
Top Providers for Small Businesses
| Provider | Best For | Notes |
|---|---|---|
| The Hartford | Most industries | Strong small biz focus |
| Travelers | Mid-size businesses | Competitive rates |
| Employers Holdings | Low-risk industries | Great for small offices |
| Hiscox | Freelancers & microbiz | Flexible, fast quotes |
| biBERK (Berkshire) | Online-first, low cost | Good for budget buyers |
| Pie Insurance | Contractors & trades | Specializes in trades |
How to Lower Your Premium
Maintain a strong safety program and document it
Train employees on injury prevention
Report injuries immediately and manage claims actively
Classify employees accurately (misclassification raises costs)
Use a pay-as-you-go policy to avoid large upfront payments
Bundle with other business policies for discounts
Pay-As-You-Go Workers’ Comp
Many small businesses prefer this model:
Premiums are based on actual payroll each period (not estimated)
No large upfront deposit
Avoids costly year-end audits
Better for seasonal businesses with fluctuating staff
Quick Summary
| Factor | Impact on Cost |
|---|---|
| High-risk industry | |
| Large payroll | |
| Poor claims history | |
| Office/desk work | |
| Strong safety record | |
| Low payroll / few staff |
