Workers' Compensation Premium Calculator
Estimate your annual workers' comp costs based on payroll and risk factors.
Calculation Results
Manual Premium:
$0.00
Modified Premium (with E-Mod):
$0.00
Estimated Annual Premium:
$0.00
Understanding Workers' Compensation Rates
Workers' compensation insurance is a mandatory requirement for most businesses with employees. Unlike other types of insurance where premiums are flat, workers' comp premiums are highly variable and based on specific risk factors associated with your industry and safety history.
The Workers' Comp Formula
The standard formula used by insurance carriers to determine your base premium is:
(Payroll / 100) x Class Code Rate x Experience Modifier = Total Premium
Key Components of the Calculation
- Payroll: This is the total gross annual remuneration for your employees. Note that some states allow for exclusions of overtime pay premiums or officer salary caps.
- Class Code Rate: Every job type is assigned a "Class Code" by organizations like NCCI. High-risk jobs (like roofing) have higher rates than low-risk jobs (like clerical accounting). The rate is applied per $100 of payroll.
- Experience Modifier (E-Mod): Also known as the X-Mod, this is a multiplier based on your company's claims history compared to others in your industry. A 1.0 is the industry average. Below 1.0 (e.g., 0.85) means you are safer than average and receive a discount; above 1.0 (e.g., 1.20) means you have a higher claim frequency and must pay more.
Real-World Example
Imagine a small construction firm with the following data:
- • Annual Payroll: $250,000
- • Class Code Rate (Carpentry): $12.00 per $100
- • E-Mod: 0.90 (A 10% safety discount)
Step 1: $250,000 / 100 = 2,500 units.
Step 2: 2,500 x $12.00 = $30,000 (Manual Premium).
Step 3: $30,000 x 0.90 = $27,000 Estimated Annual Premium.
How to Lower Your Workers' Comp Costs
Business owners can take proactive steps to reduce their premiums:
- Improve Workplace Safety: Reducing the frequency and severity of injuries will lower your E-Mod over time.
- Correct Classification: Ensure your employees are assigned the correct class codes. Misclassifying a receptionist as a field worker can drastically increase costs.
- Return-to-Work Programs: Getting injured employees back to light-duty work faster reduces the "indemnity" portion of claims, which helps your E-Mod.
- Annual Audits: Keep precise payroll records. Since premiums are estimates, an audit at the end of the year ensures you aren't overpaying based on projected versus actual payroll.