In 2024, the average workers’ comp rate for a cannabis worker is $0.88 per $100 of payroll, plus taxes and fees. Your exact premium will depend on your state, payroll size, and claims history.
What Determines Workers' Comp Premium for Cannabis Workers?
Workers’ comp premiums for cannabis workers are based on the following factors:
Industry Risk Level
Workers’ comp insurance costs differ for each industry. It all depends on the level of risk in your type of work.
How is the level of risk for each job determined? The National Council on Compensation Insurance (NCCI) is an organization that systematically categorizes every job and its level of risk. Each job type or industry is given a 4 digit class code, like a barcode, so others can easily reference it.DA
The risk levels are based on how likely a worker in a particular industry is to get hurt and how bad the injury usually is. They are calculated using historical data for each state and industry.
Higher-risk industries like construction or manufacturing generally have higher rates compared to lower-risk industries such as office work.
In the cannabis industry, most states use the following codes:
- 0035: Cannabis growers and cultivators
- 4825: Cannabis processing
- 8045: Retail dispensaries
- 8047: Wholesale dispensaries
- 8832: Medical dispensaries
For a more detailed explanation, check out our cannabis workers' comp class code guide.
Payroll
Workers' comp premiums are calculated according to payroll. It's usually expressed as a rate per $100 of payroll. The larger the payroll, the more you pay because there is a higher potential for injury.
Your Claims History
If your cannabis business has a history of injuries and accidents, your premiums could be higher due to increased medical expenses.
However, if you are a new business without a claims history, this will not be factored in initially. If you already have a high number of claims, there are steps you can take to manage and reduce them.
How are Workers' Compensation Premiums calculated for Cannabis Employees?
Here’s a formula you can use to calculate your premium:
Payroll divided by 100 x rate = Premium
Calculate the Payroll
The Payroll refers to the total amount of money paid to your cannabis employees throughout the year. Make sure to include all your employees in your total payroll figures.
If you don’t know the annual payroll, take the hourly rate of each employee and multiply it by the hours they work per week and weeks they work per year to get the estimated annual payroll.
Divide the payroll figure by 100 to obtain the Payroll Per $100. This is how much insurance you have to pay for every $100 of payroll.
Find your Rate
Next, determine the industry Rate for your state.
Here are 2 ways you can find your rate:
- If you have an existing policy, check your policy in the section that breaks down the premium. Typically the first line item lists the class code, projected payroll (or remuneration) and the rate per every $100 of payroll.
- Use the list below to find the national average for your cannabis class code from one of our leading carriers as an estimate.
Average Cannabis Workers’ Comp Rates per $100 of Payroll
- Class Code 0035: $1.61
- Class Code 4825: $0.69
- Class Code 8045: $0.63
- Class Code 8047: $0.84
- Class Code 8832: $0.28
Let’s work through an example together:
Say you own a retail dispensary in Arkansas. You handle all the growing, and your employees work in the dispensary. Let’s assume you have three employees: one full-time manager and two cashiers.
This staff needs to be protected by a Cannabis Workers’ Comp Insurance policy that you as the employer pay for and provide. Let’s consult the formula and follow it to figure out your premium.
Payroll divided by 100 x rate = Premium
Step 1: Calculate Payroll
We need the annual payroll of each employee.
- The full-time manager is making $17/hour, multiplied by 40 hours and 52 weeks for an annual payroll of $35,360.
- The 2 part-time cashiers are making $12/hour, multiplied by 30 hours and 52 weeks for an annual payroll of $18,720 for each associate.
Step 2: Determine Rates
Now you have to figure out which class code applies to each employee and find the corresponding rate.
- Your entire staff are classified as cannabis retail dispensary employees with Arkansas’ rate of $0.63.
- As the owner, you have the option to include or exclude yourself from coverage. Let's assume you decide to exclude yourself.
Step 3: Apply the Formula
Here’s how to apply the formula.
Class Code 8045: First, add the entire 8045 payroll:
- 1 full time manager: $35,360
- 2 part-time cashiers: $18,720 x 2 = $37,440
- Total: $72,800
Apply the formula: $72,800 (payroll) divided by 100 x $0.63 (industry rate) = $459
Total annual premium = $459.
This would be in addition to taxes and fees which usually add a few hundred dollars to your premium.
Remember that the actual premium may vary depending on factors such as your cannabis's experience modification number, specific state regulations, and any discounts provided by your insurance carrier.
Does it matter where I buy a Policy from?
When you're looking for workers' compensation insurance for your cannabis business, it's natural to wonder if it matters where you buy a policy. The truth is, it does matter, and it's about more than just finding the cheapest option.
As a cannabis owner, you want a policy that offers the right coverage for your business. But more importantly, you need a reliable company that will take care of your employees when they get hurt and submit a claim so they can get back on their feet and rejoin the workforce.
When selecting a workers' compensation policy, it's important to consider:
- Reputation: Choose a provider with a good track record for handling claims efficiently
- Financial Strength: Ensure the provider is financially stable to handle claims
- Customer Service: Look for responsive and helpful customer service
- Industry Expertise: Providers with experience in the cannabis industry can offer more tailored coverage
What are the benefits of Workers' Comp?
Medical Expenses
If a worker suffers from a work-related injury or illness, Workers’ Comp Insurance covers all medical care for work-related injuries or illnesses, including surgeries, therapy, and transportation costs.
Lost Wages
When an employee suffers from a work-related injury or illness that prevents them from working, workers' comp compensates the employee for lost wages during recovery.
Death Benefits
In the unfortunate event that an employee passes away due to a work-related incident, workers' comp provides financial support for the family.
Protection from Lawsuits
One of the key advantages of workers' comp is that it can shield your cannabis business from potential lawsuits by injured employees.
Tips to save money on Workers' Comp Insurance
Implement a Safety Program
A quick way to reduce your cannabis workers' comp premium is by implementing a safety program in your cannabis business. If you tell your insurance company that you’ve implemented a safety program, they are likely to give you a discount.
Some key components of a cannabis safety program are:
- Regular safety training for employees
- Provision of personal protective equipment (PPE)
- Clear guidelines for proper handling of equipment
- Sun safety for outdoor workers: if you don't have a greenhouse, be careful in the sun and stay hydrated while working
Ensure Class Codes are Correct
Another method to lower your workers' comp premium is ensuring your class code is correct. Errors in class codes can lead to paying higher premiums than necessary.
Check your current class code and confirm it accurately represents your cannabis's operations.
Ask for Discounts
As a business owner, you can inquire about premium discounts from your insurance provider. Some companies offer credits for maintaining a safe work environment or having a strong claims history. Be proactive and ask if your cannabis is eligible for these discounts.
Reduce Claims
Lowering your cannabis's claims history (experience modification rate or ExMod) is another way to reduce workers' comp rates.
This is more of a long-term strategy but well worth it. By effectively managing and preventing incidents in your workplace, you can lower your ExMod and save on premium costs.
Check out more tips on how to save money on cannabis workers comp.
Get a better Estimate with an Online Quote
For a more precise estimate, try our online quoter to get an exact calculation of your workers' comp costs.
Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.
The question people ask us most often is, “Does my business need workers comp?” This often leads to the second-to-most frequently asked question: ”Do owners need workers comp?”
