To find out precisely what you would pay for workers’ compensation insurance for an employee, you would need to connect with an insurance provider to determine your annual premium. Once you have a policy, your insurer will perform an audit to ensure you are paying the correct amount based on how many employees you have and what activities they perform.


The formulas that insurers use to determine workers’ compensation premiums have many moving parts. What’s more, these formulas depend on the workers’ compensation laws in each state. However, if you’d like to get a general idea of what you might pay, here’s an overview of the steps you can take to get an estimate on your own.


Steps to calculate workers’ compensation cost for an employee

  1. Determine the class code of your employee. Depending on your state, workers’ compensation class codes are either set by your state workers’ comp agency or by the National Council on Compensation Insurance. Class codes are based on work duties and risk levels.

  2. Find out the premium rate for the employee’s class code. You can ask different insurance providers for their rates by class code. The rate will be given in dollars and cents for each $100 of payroll for each class code.

  3. Determine your annual payroll for the employee.  

  4. Take the annual payroll for the employee and divide by 100.

  5. Multiply the number by the premium rate for the class code to find the total cost of workers’ compensation insurance for that employee.

Remember, this calculation will give you a very rough estimate. Other factors—such as number of employees, location, and experience modification—can influence how much workers’ compensation costs.


Sound complicated? Consider skipping the math and heading directly to a trusted insurance provider with skilled experts who can make workers’ compensation insurance easy. Learn more about how workers’compensation insurance can protect your small small business.



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