One percentage does not fit every contractor
Workers’ compensation cost can vary by state system, classification code, payroll, insurer, claims history, experience modification, deductible structure, and audit adjustments. Two contractors in the same state can have different effective rates.
Use the rate from source documents
Start with the current policy, insurer worksheet, classification code, and audit basis. Confirm whether the quoted rate is per $100 of payroll, whether specific pay is excluded, and whether fees or experience modifiers are shown separately. The calculator input should reflect the effective cost method used by the business rather than an internet average.
Example
A rate written as $6.25 per $100 of applicable payroll is equivalent to 6.25% for a simplified estimate. On $30 of applicable hourly wage, that component is $1.875 per paid hour before other adjustments. The actual policy calculation may include minimum premiums, expense constants, modifiers, and classification splits.
Common mistakes
- Using the office classification for field labor.
- Applying one trade rate to every employee.
- Ignoring the experience modifier or policy audit.
- Adding the same workers’ compensation cost both directly and through overhead.
Official directory: U.S. Department of Labor workers’ compensation resources. State rules and private insurance arrangements differ.