For small business owners and contractors budgeting payroll costs before hiring.
Workers comp costs $400 to $7,500 per employee per year for most industries. Office and clerical staff run $400 to $600 annually. Construction trades run $2,000 to $5,000. Roofing and high-risk work can exceed $7,500 per employee. The formula is: (Annual Payroll / 100) x Class Code Rate.
Workers comp premiums are not priced per employee as a flat fee. They scale with payroll and the risk level of the work. Every job type is assigned an industry class code, and each class code carries a different rate per $100 of annual payroll. A $45,000 office administrator and a $45,000 roofer look identical on payroll but produce very different premiums.
Here are benchmark rates for common trades and roles in 2026:
| Job Type | Class Code | Rate per $100 | Annual cost at $50K payroll |
|---|---|---|---|
| Clerical / office | 8810 | $0.75 | $375 |
| Retail store | 8017 | $1.50 | $750 |
| Plumbing | 5183 | $5.00 | $2,500 |
| Electrical | 5190 | $4.00 | $2,000 |
| General carpentry | 5403 | $6.50 | $3,250 |
| Roofing | 5551 | $15 to $25 | $7,500 to $12,500 |
Your actual premium is also adjusted by an experience modifier (e-mod). New businesses typically start at 1.0. A strong safety record earns a modifier below 1.0, reducing your premium. A history of claims pushes it above 1.0. An e-mod of 0.85 on a $3,000 base premium saves you $450 a year per worker.
State matters as much as industry. California premiums average 40% higher than the national norm. Wyoming, North Dakota, and Ohio require coverage through state funds only, which changes how you buy and price coverage. Always get rates from at least two carriers and verify that every employee is coded to the correct class.
Workers comp is a state-mandated insurance policy that pays medical bills and lost wages when an employee is injured on the job. In exchange, employees give up the right to sue the employer. Most states require coverage as soon as you hire your first employee. Premiums vary by payroll, job type, and claims history.
Get your exact premium estimate in 30 seconds
Use the Free Workers Comp Calculator →Divide the annual premium by 12. A $2,400 annual premium for a plumber is $200 per month. Office staff at $480 per year work out to $40 per month. Most insurers offer pay-as-you-go monthly billing tied to actual payroll runs.
In most states, yes. The threshold is typically having at least one employee on payroll. A few states exempt very small employers, but the rules vary. Texas is the only state that makes workers comp fully optional for most employers.
Penalties are serious. Most states charge $1,000 to $2,000 per uninsured employee per day. You also become personally liable for any injury costs. Some states issue stop-work orders that shut down your business immediately.
Yes. State insurance bureaus file rate changes annually. Rates typically shift 2% to 8% year over year. Your personal rate also changes at each renewal based on your updated e-mod score and any reclassification of employees.
Yes. Workers comp premiums are a fully deductible business expense under IRS rules. They reduce your taxable income dollar for dollar in the year paid. Keep your policy invoices as documentation for your tax return.
A ghost policy is a workers comp policy for a sole owner with no employees. It shows proof of coverage without insuring actual workers. Some clients and GCs require it before hiring a solo contractor. It typically costs $500 to $1,500 per year.
Prevent injuries with a written safety program, conduct regular training, and report claims immediately. A lower e-mod from a clean claims history saves the most money over time. Also audit your class codes annually since miscoded employees drive up rates unnecessarily.
Workers comp covers both injuries and occupational illnesses. If an employee develops a disease directly caused by job conditions (like asbestosis or repetitive stress injuries), it qualifies. Coverage for general illness unrelated to the job is not included.
This content is for informational purposes only and does not constitute financial, legal, or tax advice. Consult a qualified professional for guidance specific to your situation.