Workers’ compensation insurance is mandatory for all California employers, regardless of business size. This coverage ensures that employees who suffer work-related injuries or illnesses receive medical treatment and wage replacement benefits. For business owners, understanding the cost of workers’ comp insurance is important, as premiums can vary based on multiple factors.
Understanding Workers’ Comp Insurance Costs in California
Workers’ comp insurance rates in California are among the highest in the nation. The average premium in 2020 was $1.45 per $100 of payroll, which is higher than the national average of $1.19 per $100 of payroll. However, actual costs depend on the type of business, the number of employees, and past claims history.
How Workers’ Comp Premiums Are Calculated
Insurance companies use several factors to determine workers’ compensation premiums:
- Payroll – Employers pay a set rate for every $100 of payroll. Higher payrolls mean higher insurance costs.
- Industry Classification – Businesses are classified based on risk. A construction company pays more than an office-based business because the work is more hazardous.
- Claims History – Companies with frequent workers’ comp claims will have higher premiums. A clean safety record can help lower costs.
- Experience Modification Rate (EMR) – This number compares an employer’s claims history to similar businesses. A lower EMR can reduce insurance costs.
- State Regulations – California’s workers’ compensation laws set requirements that affect rates, such as mandatory coverage for all employees and specific benefits that must be provided.
Average Cost of Workers’ Comp Insurance in California
The cost of workers’ comp insurance varies widely based on industry and risk level. Here’s a look at typical rates:
- Low-risk businesses (e.g., offices, retail stores) – $0.40 to $1.00 per $100 of payroll
- Moderate-risk businesses (e.g., restaurants, auto repair shops) – $1.00 to $5.00 per $100 of payroll
- High-risk businesses (e.g., construction, manufacturing) – $5.00 to $30.00 per $100 of payroll
For example, a construction company with a $500,000 payroll could pay between $25,000 and $150,000 annually, while an office with the same payroll may pay only $2,000 to $5,000.
What Workers’ Comp Insurance Covers
Workers’ comp insurance provides financial protection for employees and employers. It typically covers:
- Medical expenses – Doctor visits, surgeries, hospital stays, and rehabilitation costs.
- Lost wages – Partial wage replacement if the employee cannot work due to injury.
- Disability benefits – Compensation for temporary or permanent disabilities resulting from workplace injuries.
- Death benefits – Funeral costs and financial support for dependents if an employee dies from a work-related injury.
Penalties for Not Carrying Workers’ Comp Insurance
California law requires all businesses with employees to have workers’ compensation insurance. Employers who fail to carry coverage face severe penalties:
- A minimum fine of $10,000
- Possible criminal misdemeanor charges
- Additional penalties of $1,500 per uninsured employee
- Liability for all medical expenses and lost wages for an injured employee
Reducing Workers’ Comp Costs
Business owners can take steps to lower their workers’ compensation premiums:
- Improve workplace safety – Implementing safety training and protocols reduces the likelihood of claims.
- Classify employees correctly – Misclassification can lead to higher premiums.
- Maintain a good claims history – Fewer claims lead to lower insurance costs.
- Work with an insurance broker – Shopping around for the best rates can help find affordable coverage.
Need Help With a Workers’ Compensation Claim?
Workers’ compensation insurance is a necessary expense for California employers, but costs vary based on industry, payroll, and claims history. Employers should take proactive steps to manage their premiums while ensuring their employees are protected.
If you have been injured at work and need help with a workers’ compensation claim, the Law Offices of Hinden & Breslavsky, APC, is here to assist you. Call us at (323) 954-1800 to discuss your case and get the benefits you deserve.