5 Proven Ways to Lower Your Workers' Compensation Premium

Updated: Feb 15, 2019

Workers compensation insurance is mandatory in California. If your business employs workers and you are not a qualified self-insured, you are obligated by law to purchase a workers compensation policy. While workers compensation coverage is a necessary expense, there are steps you can take to lower your premium. Professional Dynamics (PDI) has been a trusted cost containment solutions provider for Workers Compensation Payers and public entities for over 34 years. Below we'll outline some of they key ways we can help your company lower your premium. For your efforts to be successful, you must first understand how your premium is calculated, so lets look at that first.

California workman's comp rates are set and regulated by the Workers’ Compensation Rating Bureau of California. High-risk occupations have higher premiums than lower-risk occupations. Employers who establish a good safety record will be rewarded with lower premiums than others in their industry. 

Every occupation is assigned a risk classification, and each classification is associated with a specific dollar amount—or Base Rate—based on how risky that occupation is. 

An employer’s workman's comp insurance premium is determined by its class code, number of employees, total payroll, type of jobs performed, and the employer’s history of accidents and workers’ compensation claims. 

Premium Calculation

Workers compensation premiums are calculated based on the following formula obtained from the Workers’ Compensation Rating Bureau of California:

BASE RATE X (PAYROLL / 100) X Experience Modifier = PREMIUM

There are two critical variables in this equation: the rate and the experience modifier.

Understanding Your Rate

The rating of workers compensation insurance is based on a classification system. Employers in the same industry that perform similar functions are assigned the same classification.

Here are a few sample 2017 base rates (rate per $100 of employer payroll) for select California class codes:

0042 Landscaping: $7.713632

Machine Shop: $3.705027

Masonry: $14.635183

Plumbing: $7.015190

Electrical: $5.688810