It can be difficult for large, multi-state organizations to make sense of workers’ compensation costs, because they vary widely by location. And it’s not just the location of your business. The rate you pay depends almost entirely on where employees perform their work.
According to the most recent available data, the median cost to businesses is $1.09 per $100 of payroll. North Dakota is the least expensive state at $0.50 per $100 (Oregon Dept of Consumer and Business Services). Hawaii is the most expensive at $2.52, more than 5x North Dakota’s rate. When you budget for workers’ comp, make sure to use the rate(s) in the state(s) where you do business, not a national average.
The wide range of workers’ comp rates is mostly due to three factors:
- State regulations. Each state sets its own benefit levels, medical fee schedules, and rules for how long injured employees can draw benefits. States with higher wage-replacement percentages and longer benefit periods tend to post higher averages.
- State fund structure. A handful of states run monopolistic systems, where the state itself sets rates, and there’s no competing insurer to shop around. In other places, insurance companies file their own rates above a state-set floor, making it a competitive market.
- Claim frequency and severity. States with higher medical costs per claim, older workplace infrastructure, or a heavier mix of hazardous industries post higher averages no matter how the market is structured.
Workers’ Comp Rates by State: Data Table
Every state sets its own workers’ comp rates. This chart shows what employers pay per $100 of payroll in each state and Washington, D.C., based on the most current nationwide comparison available. [FH1] States are listed alphabetically for quick lookup, and the five highest-cost and five lowest-cost states are marked.
| State | Rate per $100 of Payroll | National Rank (of 51) | Notes |
| Alabama | $1.11 | #24 | |
| Alaska | $1.16 | #20 | |
| Arizona | $0.70 | #46 | |
| Arkansas | $0.53 | #50 | 5 lowest-cost states |
| California | $1.86 | #4 | 5 highest-cost states |
| Colorado | $1.05 | #28 | |
| Connecticut | $1.48 | #6 | |
| Delaware | $0.97 | #32 | |
| District of Columbia | $0.73 | #43 | |
| Florida | $1.00 | #30 | |
| Georgia | $1.09 | #26 | |
| Hawaii | $2.52 | #1 | 5 highest-cost states |
| Idaho | $1.10 | #25 | |
| Illinois | $1.34 | #13 | |
| Indiana | $0.71 | #45 | |
| Iowa | $1.21 | #19 | |
| Kansas | $0.91 | #35 | |
| Kentucky | $0.76 | #41 | |
| Louisiana | $1.41 | #9 | |
| Maine | $1.37 | #11 | |
| Maryland | $0.89 | #37 | |
| Massachusetts | $0.97 | #31 | |
| Michigan | $0.90 | #36 | |
| Minnesota | $1.25 | #17 | |
| Mississippi | $0.94 | #34 | |
| Missouri | $1.31 | #16 | |
| Montana | $1.34 | #14 | |
| Nebraska | $1.12 | #23 | |
| Nevada | $0.73 | #42 | |
| New Hampshire | $1.22 | #18 | |
| New Jersey | $2.16 | #2 | 5 highest-cost states |
| New Mexico | $1.05 | #27 | |
| New York | $1.98 | #3 | 5 highest-cost states |
| North Carolina | $0.95 | #33 | |
| North Dakota | $0.50 | #51 | 5 lowest-cost states |
| Ohio | $0.68 | #47 | 5 lowest-cost states |
| Oklahoma | $1.33 | #15 | |
| Oregon | $0.89 | #38 | |
| Pennsylvania | $1.14 | #21 | |
| Rhode Island | $1.38 | #10 | |
| South Carolina | $1.03 | #29 | |
| South Dakota | $1.13 | #22 | |
| Tennessee | $0.80 | #39 | |
| Texas | $0.78 | #40 | |
| Utah | $0.63 | #48 | 5 lowest-cost states |
| Vermont | $1.60 | #5 | 5 highest-cost states |
| Virginia | $0.73 | #44 | |
| Washington | $1.35 | #12 | |
| West Virginia | $0.54 | #49 | 5 lowest-cost states |
| Wisconsin | $1.42 | #7 | |
| Wyoming | $1.41 | #8 |
How Workers’ Comp Rates Are Determined
Your premium isn’t a single number you can look up. It’s the result of a formula that includes these variables:
- Classification Code Rate (or Class Code Rate): the rate assigned to a specific job classification (its NCCI class code), priced per $100 of payroll. It reflects how risky that type of work is: a roofer’s class code carries a far higher rate than an office worker’s.
- Payroll: total wages paid to employees in that classification over the policy period, usually a year.
- Experience Modification Factor (EMR): A multiplier based on your company’s own claims history over the past three years. A factor of 1.0 is neutral; below 1.0 lowers your premium, above 1.0 raises it.
This is the formula that determines your premium:
(Class Code Rate x Payroll ¸ 100) x (EMR)
States set class code rates in one of two ways. In most states, a licensed rating organization (usually the National Council on Compensation Insurance, but not always) files a rate for each class code that sets a floor. Insurance companies then add their own multipliers on top of that number. That’s why two employers in the same state, same industry, and same size can end up paying different premiums for identical coverage: they’re simply insured by different carriers.
Class Codes and How They Affect Your Rate
By assigning class codes, insurers can sort workers by risk level, not job title. The system matches your rate to how hazardous the work is. Riskier jobs cost more to insure; safer ones are less expensive.
Misclassifying even a handful of employees under the wrong code, intentionally or not, is one of the most common and expensive workers’ comp mistakes HR can make. If your payroll system doesn’t track job duties accurately by location and role, an audit can turn up a bill for back premiums on top of whatever you’ve already paid.
Experience Modification Factor (EMR) Explained
Your EMR is a multiplier, usually somewhere between 0.75 and 1.5, that adjusts your base premium up or down based on your company’s claims history. A factor of 1.0 is neutral. Below 1.0 means your claims cost less than expected for a business your size in your industry. Above 1.0 means they cost more.
In dollar terms, that swing is significant. A business with a base premium of $100,000 before any EMR adjustment pays $85,000 at a 0.85 EMR, or $120,000 at a 1.20 EMR. That’s a $35,000/year difference for two companies that are otherwise identical aside from their claims history.
Unlike your state’s base rates, your business practices can impact your EMR. A formal safety program, faster injury reporting, and an active return-to-work program all pull your claims costs down over time, which pulls your EMR down at your next renewal.
States with the Highest Workers’ Comp Rates
Based on the most recent state comparison, these are the five most expensive states for workers’ comp coverage, by index rate per $100 of payroll (Oregon DCBS):
- Hawaii, $2.52
- New Jersey, $2.16
- New York, $1.98
- California, $1.86
- Vermont, $1.60
States with the Lowest Workers’ Comp Rates
On the other end, these are the five least expensive states (Oregon DCBS):
- North Dakota, $0.50
- Arkansas, $0.53
- West Virginia, $0.54
- Utah, $0.63
- Ohio, $0.68
State-Specific Workers’ Comp Systems: Monopolistic vs. Competitive
Most states run competitive markets, where private insurers compete for your business. Four states work differently: North Dakota, Ohio, and Washington require employers to buy coverage through the state fund rather than a private carrier. Wyoming works the same way for most organizations, but exempts certain employer and employee groups, who may buy coverage on the open market instead.
When you can’t choose a carrier, you can’t shop around for different rates. Washington and Wyoming both rank well above the national median in cost despite running monopolistic systems, while North Dakota and Ohio rank among the cheapest states in the country. Monopolistic doesn’t mean inexpensive. It means the state, not the market, sets the price.
Workers’ Comp Requirements by State: What Employers Must Know
Coverage rules vary as much as rates do. Some states require coverage starting with your first employee. Other states draw the line at different headcounts depending on industry, and most carve out exemptions for sole proprietors, partners, and certain family members, who can typically still opt in voluntarily.
This patchwork isn’t unique to workers’ comp. The same state-by-state variation shows up in paid sick leave laws, paid family leave requirements, and holiday pay rules. If you operate in more than one state, tracking mandatory benefits by location is its own ongoing project.
Texas is an outlier: employers there can elect not to carry coverage at all, though public employers, schools, utilities, cities, and counties still must (Texas Dept of Insurance). Opting out means giving up certain legal defenses in a workplace injury lawsuit. In most other states, skipping required coverage carries real financial risk: Florida, for example, can issue an immediate stop-work order plus a penalty of twice the unpaid premium or $1,000, whichever is greater (Florida Senate). Other states combine their own fines, stop-work orders, and personal liability for owners.
How to Estimate Your Workers’ Comp Costs
You can estimate your company’s premium with the same four inputs a carrier uses:
- Identify the class code for each employee group, based on the work people do, not their job title.
- Pull the base rate for each code in every state where employees perform work. You can get these rates from your agent or the state’s rating bureau.
- Apply your payroll. Multiply each code’s rate by that group’s payroll, divided by 100.
- Multiply by your EMR to arrive at your estimated annual premium.
How to Lower Your Workers’ Comp Premiums
You can’t control your state’s base rates, but you can influence almost everything else in your premium calculation. These five tactics can help you stay compliant and within budget:
- Audit your class codes every year, since job duties shift as your business grows.
- Build a formal safety program. OSHA-inspected employers saw a 9.4% drop in injury claims and 26% average savings on workers’ comp costs (OSHA).
- Put a return-to-work program in place. Bringing injured employees back to modified duty instead of full disability can reduce both claim costs and your future EMR.
- Explore pay-as-you-go billing with an HCM platform that meets your company’s needs.
- Review your EMR every year for errors. A single miscoded claim or stale payroll figure can inflate it for years.
Pay-As-You-Go Workers’ Comp: Is It Right for Your Business?
Traditional workers’ comp billing has HR estimate annual payroll upfront, pay a deposit, and settle the difference at a year-end audit. Pay-as-you-go billing calculates your premium from actual payroll each pay period instead, eliminating both the upfront deposit and the year-end process.
Payroll platforms like Paycor can connect pay-as-you-go coverage directly to your payroll runs, so premiums calculate automatically instead of getting reconciled by hand months later.
How Payroll Software Affects Workers’ Comp Accuracy
Workers’ comp accuracy problems start with a gap between what your payroll system shows and what your carrier has on file. HR leaders run the risk of misclassified employees, incorrect hours, or wage data that doesn’t reach the carrier until a year-end audit. Payroll systems that sync classification, hours, and wages to your carrier automatically close that gap, empowering leaders to focus on the big picture. Ready to streamline your workers’ comp process, save time, and ensure your team stays safe at work? Schedule a tour to learn how Paycor can help.