Workers' comp insurance cost: how it is priced, state by state

Workers' comp cost at a glance

Priced as

Rate per $100 of payrollone rate per class code

Adjusted by

Experience modyour claims vs. similar employers

State-fund-only states

4North Dakota, Ohio, Washington, Wyoming

No mandate

Texas, South DakotaTexas opt-out still has filing duties

No rate appears on this page because none was published by the carriers, payroll providers or PEOs we checked on October 16, 2026. We would rather show you the formula and the state rules than an undated national average. Your quote is the only number that counts.

How a workers' comp premium is calculated

1. Each job gets a class code. Clerical, sales, kitchen and roofing work carry different codes because injury risk differs. Each employee's wages go under the code for the work they do.
2. The carrier sets a rate for each code, stated in dollars per $100 of payroll, for your state.
3. Payroll per code is divided by 100 and multiplied by that code's rate.
4. The total is multiplied by your experience mod. The mod compares your claims history with similar employers: 1.00 is average, above 1.00 raises the premium, below 1.00 lowers it.
5. State charges, minimum premiums and discounts are added or taken off. Ask the carrier to list each one.
6. The policy is billed on estimated payroll (a deposit plus installments) and audited after the term, or billed each payroll on a pay-as-you-go policy.

Workers' comp is often called a "payroll tax" because it is figured on payroll, but in most states it is an insurance premium you buy from a carrier. In North Dakota, Ohio and Washington you buy it from the state fund, and in Wyoming the state fund covers extra-hazardous industries.

What each $1.00 of rate costs at 5, 10 and 25 employees

Because rates are quoted per $100 of payroll, you can work out the cost of every $1.00 of rate before you see a quote. This example assumes each employee earns $50,000 and all work falls in one class code.

So a quoted rate of $X per $100 on a 10-person, $500,000 office payroll costs $5,000 times X a year at an average mod. A mixed team needs one line per class code. Add the result to wages and payroll taxes in the employee cost calculator to see the full cost of each hire, with employer taxes from the 2026 payroll tax rate table.

State rules: monopolistic funds, Texas opt-out and headcount thresholds

Most states and DC require coverage from the first employee. The states below are the exceptions you need to know before you price a policy. In our data, the agency pages we read for Idaho, Illinois, Maryland and Vermont did not state a headcount threshold.

Hiring across state lines adds rules: Kentucky says an all-states endorsement does not satisfy its requirement, Alaska requires out-of-state employers to insure Alaska workers (no reciprocity), Connecticut requires out-of-state employers to cover Connecticut workers, and New Jersey says out-of-state employers may need coverage. State payroll tax details are on each state page, for example Washington payroll taxes and Ohio payroll taxes.

Workers' comp through a PEO

Bundling is where buyers get burned. An ADP TotalSource reviewer on Capterra wrote that "the admin fees are hidden in the workers comp rates" (October 23, 2024, a review more than a year old), and an ADP customer on Trustpilot described fees bundled into the admin and workers' comp lines, followed by a large audit bill (October 1, 2026).

• Ask the PEO for your rate per $100 of payroll for each class code, separate from the admin fee.
• Get a standalone quote for the same class codes and payroll, and compare.
• Ask whether the PEO bills on estimated payroll with an audit, or on actual payroll each period.

More on reading a PEO invoice in PEO cost per employee, and how PEOs compare on fees in the best PEO companies by score.

Buying workers' comp with your payroll software

Buyers often ask how ADP, Gusto and Paychex compare on integrated workers' comp. Here is what the pages we checked actually say:

Whichever route you use, the premium math is the same. A carrier quote, a payroll add-on and a PEO line item can all be compared on rate per $100 of payroll by class code.

For payroll software prices, see payroll software compared.

Audits: where surprise bills come from

A standard policy is generally priced on the payroll you estimate at the start (confirm the audit terms in your own policy). After the policy term, the carrier audits actual payroll by class code. If you paid more wages than estimated, or put people in a cheaper class than their work supports, you owe the difference. If payroll came in lower, you may get money back.

• Growing teams get the biggest bills. Every hire you add during the year adds payroll the deposit did not cover.
• Class codes get re-checked. A warehouse worker coded as clerical is moved at audit.
• Subcontractor payroll gets checked. Keep each sub's certificate of insurance; construction payroll covers how this shows up at audit.
• Pay-as-you-go billing shrinks the gap because the premium follows each payroll; BBSI states it has no year-end audits.

Common mistakes

• Treating Texas opt-out as no paperwork. Non-subscribers must notify the state through the DWC Employer E-File system and report qualifying injuries.
• Buying a private policy in a state-fund state. In North Dakota, Ohio and Washington, coverage comes from the state fund. In Wyoming, extra-hazardous industries must cover through DWS.
• Forgetting owners and officers. Florida and Georgia count corporate officers and LLC members toward their thresholds.
• Waiting until the threshold. In 1-employee states you need coverage before the first person starts; hiring your first employee lists it with the other first-hire steps.
• Comparing PEO and carrier quotes on different bases. Compare rate per $100 by class code, not total monthly bills.