Workers’ Compensation Cost Calculator & Cost per Employee

Free workers’ comp cost calculator: enter payroll and your rate per $100 by class code to estimate annual, monthly and per-employee cost, plus the formula.

Last updated: November 2026

To calculate workers’ compensation cost per employee, estimate your total premium as (annual payroll ÷ 100) × class-code rate × experience modification (and other factors), then divide by full-time equivalent (FTE) employees. That gives a planning estimate only—bindable prices need your exact class codes, states, and claims history. E-COMP shops 50+ carriers so you can compare real quotes.

Quick formula

Estimated premium =
  (Annual payroll subject to WC ÷ 100)
  × Class-code rate (per $100 of payroll)
  × Experience modification factor (E-mod)
  × Other applicable factors (schedule credits/debits, state assessments, etc.)
Approx. cost per employee = Estimated premium ÷ FTE employees

Rates and examples on this page are illustrative only. Actual premiums depend on state, carrier, class codes, loss history, and underwriting. This is not a quote or offer of insurance.

Worked example: office vs. higher-hazard role

Example A — Clerical / office (illustrative): Class code: e.g. clerical (state-specific) · Annual payroll: $500,000 · Illustrative rate: $0.25 per $100 payroll · E-mod: 1.00 · Estimated premium: ($500,000 ÷ 100) × 0.25 × 1.00 = $1,250 · FTEs: 10 → ~$125 per employee per year

Example B — Restaurant / light industrial (illustrative): Higher rate reflecting injury risk (e.g. $2.50 per $100, clearly labeled as an example) · Same $500,000 payroll, E-mod 1.00 → ($500,000 ÷ 100) × 2.50 = $12,500 · FTEs: 10 → ~$1,250 per employee per year

Takeaway: Cost per employee is mostly a function of class code and payroll, not headcount alone. Two businesses with the same employee count can have very different workers’ comp costs.

When you’re ready for bindable pricing, compare workers’ compensation quotes.

How is workers’ comp premium calculated?

Carriers typically build premium from:

1. Payroll by class code — Remuneration assigned to each job classification.
2. Rate per $100 of payroll — Set by state loss costs / carrier deviation.
3. Experience modification (E-mod) — Above 1.0 raises premium; below 1.0 lowers it.
4. Other factors — Schedule rating, premium discounts, terrorism/catastrophe loadings, state assessments, minimum premiums.
5. Billing method — Traditional estimated annual premium vs. pay-as-you-go that reconciles to actual payroll each pay period.

Learn more: What is workers’ compensation insurance?

How much does workers’ comp cost per employee?

There is no single national average that fits every employer. Cost per employee varies by industry/class codes, state, claims history (E-mod), payroll mix, and program type. Use the formula for budgeting, then compare carrier quotes for a bindable number. E-COMP helps employers and agents shop 50+ carriers online.

Cost per employee vs. cost per $100 of payroll

Insurers quote and audit on a per $100 of payroll basis. “Per employee” is a management convenience metric (total premium ÷ FTE). When comparing PEOs or brokers, ask whether figures are premium only or bundle admin fees.

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Part-time employees and FTE

For “per employee” estimates, convert part-time hours to FTEs (e.g. total annual hours ÷ 2,080) so a 20-hour worker counts as 0.5 FTE. Premium itself still follows payroll by class, not headcount.

What is a workers’ comp class code?

A class code is a numeric category (NCCI or state rating bureau) that groups similar job duties and risk. Each code has a rate per $100 of payroll. Misclassification is a common audit finding—when in doubt, ask a licensed advisor to review duties vs. codes. See also workers’ comp class codes explained.

Does experience modification change cost per employee?

Yes. Because per-employee cost is derived from total premium, an E-mod of 1.20 increases estimated premium (and per-employee cost) by ~20% versus 1.00; an E-mod of 0.85 decreases it. Safety programs and claim management can improve future mods over time. See Sample safety programs for small businesses.

How to estimate workers’ compensation cost (before you have a quote)

1. List employee roles and states.
2. Map roles to tentative class codes.
3. Pull recent payroll by class (or best estimate).
4. Apply illustrative rates + known E-mod.
5. Divide by FTE for a planning number.
6. Replace the estimate with competitive quotes.

Learn more about Workers’ compensation insurance and Pay-as-you-go workers’ comp.

When a calculator isn’t enough (get a real quote)

Estimates miss minimum premiums, wrong class codes, multi-state exposures, and carrier appetite. Use this page to budget; use a broker panel to buy.

Frequently asked questions

How do you calculate workers’ compensation cost per employee?

Estimate total premium as (annual payroll ÷ 100) × class-code rate × experience modification and other factors, then divide by full-time equivalent employees for an approximate cost per employee. For a bindable price, get a quote that uses your exact class codes and payroll.

How is a workers’ comp premium calculated?

Carriers typically calculate premium from payroll by class code, the rate per $100 of payroll, experience modification (E-mod), and state or carrier factors. Pay-as-you-go plans reconcile premium to actual payroll each pay period.

How much does workers’ comp cost per employee?

Cost per employee varies widely by industry class code, state, claims history, and payroll. Office roles usually cost less per $100 of payroll than higher-hazard trades. Use the formula on this page for an estimate, then compare carrier quotes.

What is a workers’ comp class code?

A class code is a numeric category insurers use to group similar job duties and risk. Each code has a rate per $100 of payroll. Correct classification is essential for accurate premium and audit results.

Does experience modification change cost per employee?

Yes. An experience modification factor above 1.0 increases premium; below 1.0 decreases it. Because per-employee cost is derived from total premium, E-mod changes the effective cost per employee.

Is workers’ comp calculated on gross or net wages?

Workers’ compensation premium is generally based on gross payroll (remuneration) as defined by your state’s workers’ comp rules—not take-home (net) pay. Which pay types count can vary by state and class; overtime is a common example, since many states count only the straight-time portion if your records separate it. Use gross wages by class code for estimates, then confirm how bonuses, tips, and owner or officer pay are treated with a licensed advisor before you bind.

Does holiday pay increase workers’ comp premium?

Holiday pay usually counts as payroll for workers’ comp, so it is already part of the payroll base in the (payroll ÷ 100) × rate formula—just like regular wages. Extra holiday hours or holiday bonuses add to payroll and can raise premium. Treatment of holiday, vacation, bonus, and premium-rate pay varies by state—ask your broker or carrier how your state and class codes handle it.

What percentage of payroll is workers’ comp?

There is no single national percentage. Premium is usually expressed as a rate per $100 of payroll by class code, then adjusted for experience modification (EMR), state factors, and minimum premiums. A low-hazard office class can cost a fraction of a higher-hazard trade. Budget with your class rates; get quotes for a real number.

How do you calculate workers’ comp for part-time employees or per hour?

Premium still follows payroll by class code, not headcount—part-time wages simply go into the right class’s payroll. For a “per employee” planning number, divide total premium by FTEs (total annual hours ÷ 2,080, so a 20-hour-a-week worker is about 0.5 FTE). For a “per hour” number, divide total premium by total annual hours worked. Part-time status does not by itself mean a cheaper rate.

What is an experience modification rate (EMR / Ex-Mod)?

An experience modification rate (also called EMR, E-mod, or Ex-Mod) is a factor that compares your actual workers’ comp claims over recent policy years with what’s expected for businesses of your size and class codes. It is calculated by NCCI or your state’s rating bureau and multiplied into your premium. A factor of 1.0 is average; employers too small or too new to qualify for experience rating are typically rated at 1.0.

Why is my workers’ comp so expensive?

Common drivers: higher-hazard class codes, large or misclassified payroll, an EMR above 1.0 from past claims, state rate levels, and minimum premiums on small policies. Shopping multiple carriers and making sure your class codes are correct often matter more than headcount alone. E-COMP helps employers compare quotes from 50+ carriers.