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Workers Comp Insurance Cost

Amy Danise

Workers comp insurance costs an employer an average of $74 a week per employee, based on data from the Bureau of Labor Statistics (BLS). Workers comp insurance is often required by state law and covers work-related injuries and illness, from broken bones to carpal tunnel to breathing problems.

Workers compensation insurance costs will vary by occupation, based on the risk of the job. We calculated weekly workers comp costs for employers by using the cost of workers comp per hour worked from the BLS for 40-hour weeks for a month.

Monthly workers comp costs in private industries

Occupation Average monthly workers comp insurance cost per employee Workers comp cost as a percent of employee's total compensation
All workers $73.60 1.4%
Management, professional and related $51.20 0.5%
Sales and office $35.20 0.9%
Service $54.40 2.1%
Natural resources, construction and maintenance $185.60 3.3%
Production, transportation and material moving $134.40 3%
Source: Bureau of Labor Statistics

How workers comp insurance cost is determined

These factors typically affect the cost of workers comp insurance:

  • The higher the payroll, the more workers comp will cost.
  • The classifications of jobs at the company (higher risk jobs mean higher insurance cost).
  • The company's Experience Modification Rate (EMR), which is a comparison of the industry's average "experience" (both the frequency and cost of claims) to your business's specific experience. It's sometimes called an E-Mod or MOD rate. Whatever you choose to call it, this factor will greatly affect workers comp cost. And a having a lot of claims in the last three years, even if they're all relatively small, can really ding you.

"A lot of small businesses do not understand the difference between workers compensation rates and workers compensation premiums," says Trey Gillespie, assistant vice president for workers compensation, commercial lines for the Property Casualty Insurers Association of America (PCI), a trade group.

"Consequently, with the small business that may not have been operating a long time, they sometimes get confused about why their premiums in the second and third years of operation are higher than the first year," he says. They don't realize that the workers comp rate is applied to the size of their payroll, so their premiums go up.

For example, "The cost to cover $100,000 in payroll is a lot less than the cost to cover $200,000 in payroll," says Gillespie.

Reducing workers compensation cost

Because cost is greatly affected by a business's Experience Modification Rate (EMR), making sure your EMR is good can go a long way in saving money. Focus on preventing claims in general, as "frequency" (the number of claims made) is more important than "severity" (the cost of any particular claim).

Here are some employee training requirements and resources from the Occupational Safety and Health Administration.

To keep a good EMR, Gillespie of PCI recommends looking for ways to make the workplace safer and being proactive about getting injured employees back to work.

"The overriding thing is for the business to be engaged in the workers compensation process," he says. "Be engaged with the insurance company and have the job site evaluated periodically," he says.

"Remain engaged with the injured worker so they can better understand what they can do to speed access to medical care and return to work," says Gillespie. Make sure injured workers don't feel alienated in the workers comp process, he advises.

Here's more about the ABCs of Experience Rating from the National Council on Compensation Insurance.