Every 7 seconds, a worker in America gets injured on the job, leading employers to spend more than USD 100B annually on compensation insurance. A new study by Affordable Contractors Insurance analyzed these expenses across the US to find states where businesses pay the most to cover workplace injuries.
The research examined several labor expenses for each state: insurance costs per USD 100 of payroll, average hourly earnings, what employers pay per hour and per year to cover injured workers, and how well states balance costs with earnings and safety. States received scores from 1 to 99, where higher numbers mean businesses pay more relative to wages and productivity.
Here’s a look at the top 10 states with the highest workers’ compensation costs:
| State | Average Workers’ Compensation Costs (per $100 of payroll) | Workers’ Comp Cost per Hour ($) | Cost Efficiency Index | Final Score |
| New Jersey | 2.44 | 0.82 | 15.54 | 99 |
| Hawaii | 2.27 | 0.74 | 16.44 | 92 |
| Louisiana | 2.13 | 0.76 | 13.95 | 91 |
| California | 2.26 | 0.75 | 18.18 | 90 |
| New York | 2.15 | 0.71 | 18.12 | 86 |
| Vermont | 1.98 | 0.67 | 17.75 | 80 |
| Wyoming | 1.86 | 0.65 | 17.05 | 77 |
| Maine | 1.67 | 0.55 | 19.31 | 67 |
| Wisconsin | 1.67 | 0.56 | 20.43 | 66 |
| Connecticut | 1.64 | 0.55 | 23.76 | 64 |
You can access the complete research findings here.
New Jersey has the most expensive workers’ compensation system in America. Employers here spend USD 2.44 on insurance for every USD 100 they pay in wages, the highest rate in the country. This amounts to about USD 1,621 per employee each year, or roughly 82 cents for every hour worked. On average, companies in New Jersey pay their employees more than USD 66K annually, meaning workers’ compensation costs account for nearly 2.4% of total payroll.
Hawaii comes second to New Jersey. Local companies spend slightly less on coverage here, but still a premium of USD 2.27 for every USD 100 they pay out. This adds up to USD 1,445 annually per worker, or about 74 cents for each hour an employee is on the clock. With workers earning an average of USD 64K per year, employers must dedicate roughly 2.3% of that amount to coverage.
Louisiana holds third place with a compensation system that drives up costs for local businesses. Businesses pay USD 2.13 for every 100 dollars in wages, equivalent to USD 1,181 per employee over the course of a year. The hourly cost reaches 76 cents, one of the higher rates nationally, despite Louisiana having lower average salaries at USD 55K. This makes it the least cost-efficient state, as businesses here pay nearly as much in insurance as wealthier regions.
Next up is California at fourth place. Similar to Hawaii, employers in the state face USD 2.26 in workers’ comp costs for every USD 100 of payroll. Annual expenses come to USD 1,603 per worker, or 75 cents per hour. With average earnings of USD 71K, California workers make more than those in Hawaii, which drives up the total yearly insurance costs for employers here, even though the rate per $100 of payroll is nearly identical.
New York ranks fifth among states with the costliest compensation systems. Workers here earn an average of USD 66K annually, and employers must spend about 2.2% of that payroll on insurance coverage, making New York one of the most expensive states in the Northeast for businesses to operate. On average, New York companies spend USD 1,429 per employee each year, or roughly 70 cents for every hour worked.
Vermont takes sixth as another Northeastern state with high coverage expenses for smaller businesses. Employers here shell out USD 1.98 for every USD 100 they pay workers. While it may sound modest, with USD 62K annual salaries, the rate adds up to USD 1,219 per employee over a year. This means companies must set aside a full 2% of their payroll budget just to keep insurance coverage.
Next on the list is Wyoming. The companies in the state pay USD 1.86 per USD 100 of payroll despite workers earning only USD 58K per year, below the national average. That’s USD 1,080 per employee annually, or 65 cents every hour someone’s working. This makes Wyoming one of the least cost-efficient states, as businesses pay high insurance rates relative to workers’ productivity.
Maine comes in eighth as businesses here also face high insurance bills. Maine-based companies have to budget USD 930 on coverage per worker each year. This is about USD 1.67 for every USD 100 paid out in wages. With local workers earning around USD 56K annually, this means insurance expenses take up nearly 1.7% of what employers spend on payroll.
In the ninth place is Wisconsin. Employers pay the same rate as in Maine at USD 1.67, but because workers here earn slightly more at USD 59K annually, the total bill climbs to USD 987 per employee. That’s 56 cents every single hour worked, and while it’s lower than the top states, businesses still have to spend nearly USD 1K per person before they even consider salaries, benefits, or other operating costs.
Connecticut completes the top ten states with the highest workers’ compensation costs. Employees here earn USD 68K on average, and companies must factor 1.6% of that amount for covering their insurance. This works out to USD 1,117 per employee annually, which is 55 cents per hour, putting the state on par with Maine from the same Northeastern region.
“Business owners often focus on wages and benefits when calculating labor costs, but workers’ compensation insurance can be a hidden expense that catches them off guard,” says Sean O’Keefe, CEO & Founder of Affordable Contractors Insurance. “In states with high rates, the insurance premiums can cost as much as giving every employee a raise of several hundred dollars per year. Companies that operate in multiple states quickly learn that what they pay in California or New Jersey is very different from what they’d pay in a lower-cost state. Smart planning means factoring these differences into any expansion or relocation decisions, because moving operations to a lower-cost state can save serious money without cutting anyone’s paycheck.”