Free Contractor Tool
Workers' Comp Cost Calculator
Estimate your premium from payroll, class rate, and experience mod — then see what it costs per billable hour and what a better mod would be worth.
Built by SubcontractorHub — the software contractors use to quote, finance, and run every job.
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Estimate Your Premium
Split payroll between field and office codes — clerical work carries a fraction of the field rate, and payroll sitting in the wrong code is one of the costliest errors in contractor insurance.
You need your own rate for this to mean anything. Class code rates are set per state and per classification and vary by multiples between trades. Take the rate per $100 of payroll from your policy declarations or your agent — this tool tests scenarios once you have it, and cannot estimate a rate for you.
1. Payroll by class code
From your policy declarations.
2. Experience mod & uninsured subs
1.00 is average.
Subs without a valid certificate.
3. Context for pricing
Estimated annual premium
$27,633
As % of payroll
5.4%
Cost per billable hour
$3.84
As % of revenue
1.54%
Base premium before the mod is $27,633. At a mod of 1.00 you pay $27,633.
Moving from 1.00 to 0.85 would change the premium by $4,145 a year. Mods are calculated on a rolling multi-year window, so a bad claim year keeps costing after the injury is long resolved.
Add any subcontractor payments where you cannot produce a current certificate of insurance — in most states those get added to your payroll at audit, months after the work is finished.
This applies the standard base formula only. It excludes carrier schedule credits and debits, expense constants, minimum premiums, state assessments and surcharges, terrorism and catastrophe loads, deductible credits, and the rules of monopolistic state funds — all of which change the final premium. Officer inclusion and exclusion elections and payroll caps also vary by state. All calculations are estimates based on historical information and should be verified by the user. This tool is provided as a free service for planning purposes only and is not a substitute for professional insurance, accounting, or legal advice.
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Two of the three levers here are record-keeping problems. Payroll has to be segregated by class code as it is incurred, and every subcontractor needs a current certificate on file before work starts — both are far cheaper to maintain than to reconstruct at audit. That discipline is the same one that keeps HVAC, roofing, and solar job costs accurate the rest of the year.
How the Premium Is Built
The formula
(Payroll ÷ 100) × class code rate × experience modification factor
Three inputs, each with a different kind of leverage. Payroll is what it is. The class code rate is set by your state and classification, and while you cannot negotiate it, you can make sure payroll is sitting in the correct code — office and clerical work carries a small fraction of the field rate, and it is routinely misallocated in both directions.
The experience mod is the part you influence, slowly. It compares your claims history to what is expected for a business of your size and class, with 1.00 as average. Because it is calculated on a rolling multi-year window, a bad year keeps costing you after the injury is resolved — and a sustained safety record keeps paying after the effort stops feeling new. Lost-time claims move it hardest, which is why a documented return-to-work programme is one of the highest-return safety investments available.
The line that surprises contractors most is subcontractors. In most states a sub who cannot produce a valid certificate of insurance is treated as your employee at audit, and their payments are added to your payroll at the appropriate class rate — discovered months after the work is done, when the bill arrives. Premium is always estimated up front and reconciled to actual payroll afterwards, so a business that grew during the year should expect an audit invoice rather than be startled by one.
Frequently Asked Questions
- How is workers' compensation premium calculated?
- The base formula is (payroll ÷ 100) × class code rate × experience modification factor. Rates are quoted per $100 of payroll, so a crew with $400,000 of payroll at a rate of $6.50 generates a $26,000 base premium, adjusted up or down by your experience mod. Carriers then apply schedule credits or debits, expense constants, and state assessments, which is why the final bill rarely matches the base arithmetic exactly.
- What is a class code and why does it matter so much?
- A class code is the classification assigned to a type of work, and it drives the rate. Roofing carries some of the highest rates in construction, while plumbing, HVAC, and electrical are typically far lower, and clerical office staff lower still. Misclassification is one of the most common and most expensive errors in contractor insurance — payroll placed in the wrong code can move a premium by multiples, in either direction, and audits routinely reclassify it after the fact.
- What is an experience modification rate (EMR)?
- The experience modification factor compares your claims history to what is expected for businesses of your size in your classification. A mod of 1.00 is average, below 1.00 earns a discount, and above 1.00 is a surcharge. A business with $30,000 of base premium and a 1.25 mod pays $37,500; the same business at 0.85 pays $25,500. The mod is calculated on a rolling multi-year window, so both good and bad claim years follow you for several years.
- How much does workers' comp cost for a contractor?
- It varies enormously — by state, trade, payroll, and claims history — so any single national figure is misleading. Rates are set or regulated differently in every state, and a handful run monopolistic state funds. The only reliable number is a quote from a carrier or agent licensed in your state using your actual class codes and mod. This calculator is a planning aid for testing scenarios once you know your rate, not a substitute for a quote.
- Do I have to carry workers' comp for a small crew?
- It depends on your state and how many people you employ. Thresholds differ widely — some states require coverage from the first employee, others from three or five, and rules for corporate officers, family members, and sole proprietors vary again. Many states also treat uninsured subcontractors as your employees for premium purposes. Because penalties for operating without required coverage can be severe, confirm your obligation with your state's workers' compensation authority rather than a rule of thumb.
- Does subcontractor payroll count toward my premium?
- Often yes, if the subcontractor cannot produce a valid certificate of insurance. In most states an uninsured sub is treated as your employee at audit and their payments are added to your payroll at the appropriate class rate — frequently a nasty surprise months after the work is done. Collecting and tracking certificates before work starts, and keeping them current, is one of the highest-return administrative habits in contracting.
- How do I lower my workers' comp costs?
- The durable levers are fewer and less severe claims, which improve your mod over the following years, and accurate classification, which ensures payroll sits in the right code in the first place. A documented return-to-work programme limits the lost-time claims that drive mods hardest. Beyond that: collect subcontractor certificates without exception, review your audit rather than accepting it, and shop the policy — carriers apply different schedule credits to identical risks.
- What happens at a workers' comp audit?
- Premium is initially estimated on projected payroll, then reconciled to actual payroll after the policy year, so you receive a refund or an additional bill. Auditors verify payroll totals, confirm class code assignments, and look for uninsured subcontractors to add. Businesses that grew during the year are frequently surprised by a large audit bill. Keeping payroll segregated by class code as it is incurred, rather than reconstructing it afterwards, is what makes an audit uneventful.
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Book a DemoWorkers' compensation is regulated state by state. Rates, class code definitions, experience rating formulas, officer inclusion and exclusion rules, payroll caps, coverage thresholds, and the treatment of subcontractors all differ by jurisdiction, and several states operate monopolistic funds where private quotes are unavailable. This tool applies the standard base formula only and excludes schedule credits and debits, expense constants, minimum premiums, deductible credits, and state assessments. It cannot estimate a class code rate for you — use the rate shown on your policy declarations. All calculations are estimates based on historical information and should be verified by the user. This tool is provided as a free service for planning purposes only and is not a substitute for professional insurance, accounting, or legal advice. Confirm coverage obligations with a licensed agent or your state workers' compensation authority.