Yes, and there are three levers. Get payroll into the right job category, keep uninsured subcontractors off your bill, and make insurers compete for your account. Who this is for: contractors and trade business owners who just opened a workers comp bill that felt too high.
The short version
- In most states your bill is payroll times a rate for each job category, times a multiplier for your claims history if your premium is big enough to get one.
- The fastest fix is usually the job categories. True office staff should not pay the field rate.
- Get written proof of workers comp from every subcontractor before you pay them, or their cost lands on your payroll.
- Fewer claims and a return-to-work plan lower your multiplier, but that takes about three years to show.
- Shop the account. In some states every insurer charges the same base rate, so the difference is credits and dividends.
How is my workers comp bill actually calculated?
In most states, workers comp premium starts with the same math. Take each $100 of payroll, multiply it by the rate for that job category, then multiply by your experience modification (a multiplier based on your claims history, called the mod). Four states run their own fund instead: North Dakota, Ohio, Washington, and Wyoming. Washington charges by hours worked rather than payroll, so the levers below work differently there.
| Piece of the bill | What it is | Can you change it? |
|---|---|---|
| Payroll | Wages you pay, plus any sub who could not show proof | Yes. Keep records and collect proof. |
| Rate per $100 | Set for each job category (the class code). Roofing is among the highest, office work (code 8810 in most states) among the lowest. | Only by getting payroll into the right category. |
| Experience mod | Your claims history against similar businesses. 1.00 is average. You only get a mod once your premium passes your state's size threshold. Smaller contractors are rated at 1.00 with no mod. | Yes, slowly. Fewer and smaller claims over three years. |
| Credits and dividends | Discounts the insurer gives, and money some insurers return after a good year | Yes. This is where shopping pays off. |
Illustrative rates: roofing can run $15 to $40 per $100 of payroll, clerical $0.20 to $0.50. Your trade, state, and claims history set the real number. See how much workers comp costs per employee.
Is my payroll in the wrong job category?
Look here first. A category mistake repeats every year. Two common errors:
- Office staff rated as field staff. A bookkeeper or office manager can be rated in the much cheaper office category, but only if two things are true. They work in a space walled off from the shop, the yard, and the job sites, and they do office work only. Any other duty, even part time, moves their whole year of pay back to the trade rate. On the illustrative rates above that is many times cheaper.
- Everyone lumped into the highest trade. Most construction categories allow splitting one employee's payroll between the jobs they do, if your original payroll records show the hours for each. The office category is never split this way.
Are my subcontractors being counted as my employees?
At the year-end payroll check (the premium audit), the auditor asks every subcontractor you paid for a certificate of insurance, a one page summary of their coverage. If a sub cannot show workers comp, most states let the insurer charge that sub's work as your own payroll, rated at the category for the work the sub did, not at your trade rate. With no payroll records from the sub, the auditor charges on the full amount you paid, and a smaller share only where the sub supplied the materials or supplied equipment with operators. No certificate, no check. See understanding your premium audit.
What payroll can I leave out?
Not every dollar you pay counts. With records, most states let you leave out the items below.
| Pay item | Counts toward workers comp payroll? |
|---|---|
| Wages, bonuses, and commissions | Yes |
| The extra half of time-and-a-half overtime pay | No in most states, if your records show overtime separately |
| Severance pay | No in most states |
| Subs who gave you proof of workers comp | No |
How do I bring my claims multiplier down?
Your mod uses three years of claims, so this is the slow lever. What works: a written safety program, prompt claim reporting, and a return-to-work plan that puts an injured employee on light duty. See what an experience mod is and how to lower it.
Should I shop my workers comp with other insurance companies?
Usually yes, but know what you are shopping for. In North Dakota, Ohio, Washington, and Wyoming you cannot shop at all, because only the state fund sells it. In another group, including Massachusetts, New Jersey, Florida, Indiana, North Carolina, and Wisconsin, every insurer charges the same approved base rate, so the difference is credits, dividends, payment terms, and claims service. Everywhere else insurers file their own rates, and two quotes can differ widely. More in the workers comp overview.
What this looks like in real life
Illustrative example. It is typical of what we see and is not a promise of how any specific situation would be handled.
The setup: A siding and trim contractor in New York has $600,000 of payroll: $480,000 for six installers and $120,000 for two office staff in a rented office across town. The insurer rated all $600,000 at the installer rate, illustratively $9.00 per $100, with a claims multiplier of 1.18.
What went wrong: Nobody had told the insurer about the office. The two office employees were paying the field rate, and the owner assumed that was the cost of being in the trades.
What it cost: Illustrative math: $120,000 at $9.00 per $100 is $10,800 before the multiplier. At a $0.40 office rate it is $480. With the 1.18 multiplier the mistake cost about $12,200 a year, for three years running.
The fix: The broker sent the insurer a floor plan, job descriptions, and payroll by employee, and the category was corrected at renewal.
Frequently asked questions
Q: How can I reduce my workers comp insurance costs?
Start with the payroll categories, because a mistake there repeats every year. Then collect proof of coverage from every subcontractor, keep overtime separate in your payroll records, work on claims, and have a broker shop the account.
Q: How much can correcting job categories save me?
It depends how much payroll is in the wrong place. Moving one $50,000 office employee from an illustrative $9.00 field rate to a $0.40 office rate saves about $4,300 a year.
Q: Can I lower my workers comp bill in the middle of the policy year?
Usually yes. Ask the insurer to lower the payroll estimate with evidence, fix a job category, or add an owner exclusion where the state allows it. The audit still sets the final number.
Q: Does excluding myself as the owner make workers comp cheaper?
Where the state allows it, yes. Sole proprietors and partners who opt in are usually rated on a flat payroll amount the state sets, and corporate officers on their actual pay between a state minimum and a state maximum. Your bill cannot drop below the policy's minimum premium, and you lose your own medical and lost-wage coverage.
Q: Will a safety program lower my premium right away?
Some insurers give an immediate credit for a written safety program. The bigger effect comes through the claims multiplier, which uses three years of history, so the full benefit takes time.
Q: Is pay-as-you-go workers comp cheaper?
The rate is the same. You pay on real payroll each pay period instead of an estimate, so there is no large deposit and far less chance of a big bill after the audit.
Rules and prices differ by state. There is a local version of this guide for Arizona, California, Florida, Georgia, Massachusetts, New Jersey, New York, and Texas.
How Morrow helps
Morrow is a licensed independent commercial insurance brokerage that works with contractors and trades every day. Finding where a contractor's workers comp bill is too high, and fixing it, is one of the most common things we do.
- Free contract review. Send us the contract or bid documents and we mark up the insurance section in plain English, whether or not you buy anything from us.
- Free, instant certificates. Clients issue their own certificates of insurance online in about a minute, any hour, any day, at no charge.
- Markets you cannot reach online. One application, shopped across many insurance companies for general liability, workers comp, auto, umbrella, and pollution coverage.
One more thing. This article is general information and is not legal advice or a statement of coverage. Your contract and your policy wording control in every case. Requirements vary by customer, by state, and by insurance company, so have a licensed advisor review your own contract and your own policy before relying on any of it.
Last updated: Reviewed by the Morrow commercial lines team. Last updated September 2026.