If you're a small business owner in California, you've probably already felt the pinch of rising operating costs. Now there’s another line item demanding your attention: workers’ compensation insurance. Effective January 1, 2026, California’s workers’ comp benefit rates increased, and many employers may see higher premiums as a result.
The good news? You’re not powerless. With the right strategies, you can take control of your workers’ compensation costs without sacrificing the protection your employees—and your business—need.
In this post, we’ll break down what’s driving 2026 rate pressure and share five practical ways to manage your premium starting today.
What’s Behind the 2026 Workers’ Comp Rate Pressure?
Before diving into solutions, it helps to understand what’s fueling the changes. California’s workers’ compensation system ties certain benefit rates to the State Average Weekly Wage (SAWW). When statewide wages rise, benefit payouts rise too—and that can increase claim costs and put upward pressure on premiums over time.
For 2026, the weekly temporary total disability (TTD) benefit minimum and maximum increased:
- Minimum TTD rate: $264.61 per week (up from $252.03)
- Maximum TTD rate: $1,764.11 per week (up from $1,680.29)
SAWW-related changes aren’t the only factor. Several broader cost drivers can also push workers’ comp pricing upward:
- Medical cost inflation: Imaging, procedures, and rehab costs continue to rise.
- Claim complexity and litigation: More disputed claims can increase legal and administrative costs.
- Wage inflation: Higher wages (including minimum wage changes) can increase payroll-based premium calculations.
- Cumulative trauma claims: Repetitive-stress injuries can be costly and are often more likely to become complex or disputed.
- Regulatory and compliance demands: System complexity can add friction and expense across the market.
Bottom line: even if your business hasn’t had a claim, you may still notice upward movement at renewal depending on payroll, class codes, experience rating, and carrier appetite.
5 Ways to Control Your Workers’ Comp Premium in California
Rising rates don’t have to mean runaway costs. Here are five strategies California small business owners can use to keep workers’ compensation insurance affordable—without cutting corners on coverage.
1. Prioritize Workplace Safety and Injury Prevention
The most effective way to lower workers’ comp costs over time is to reduce the number and severity of claims. Fewer injuries typically mean lower claim costs, which can help improve your experience modification rate (EMR) and reduce premiums.
Practical steps you can take:
- Conduct regular safety audits and hazard assessments
- Provide ongoing safety training for all employees, especially new hires
- Invest in ergonomic tools and workstation design to reduce repetitive-stress injuries
- Establish clear protocols for reporting hazards before they cause injuries
How to make it stick: Don’t treat safety as a one-time initiative. Build it into your company culture with monthly check-ins, simple reporting, and visible leadership commitment.
For more tips, check out our guide on how to prevent workplace injuries and reduce workers’ compensation claims.
2. Implement a Strategic Return-to-Work Program
When an employee gets injured, how quickly and safely they return to work has a direct impact on claim costs. Prolonged disability periods can drive up expenses and negatively affect your EMR for years.
A well-designed return-to-work (RTW) program helps injured employees transition back to productive roles as soon as medically appropriate, often through modified or light-duty assignments.
Key elements of an effective RTW program:
- Early communication with the injured worker and their medical provider
- A list of pre-approved light-duty tasks that accommodate restrictions
- Clear timelines and milestones for returning to full duties
- Supportive check-ins to address concerns and prevent re-injury
Why it matters: Employees who stay connected to the workplace often recover faster, and employers who facilitate that connection can see lower claim costs.
3. Classify Employees Correctly
Employee classification errors are one of the most common—and costly—mistakes California businesses make on workers’ comp policies. Each class code carries a different rate based on its risk profile. If payroll is assigned to the wrong class codes, you could be overpaying or underpaying and facing an audit adjustment later.
Watch out for these common pitfalls:
- Misclassifying office staff as field workers (or vice versa)
- Failing to update classifications when job duties change
- Lumping all employees into a single high-risk category
How to avoid it: Review your policy’s class codes annually (and when operations change). Accurate classification helps prevent audit surprises and ensures you’re only paying for the risk you actually carry.
We’ve covered this and other policy pitfalls in our post on common commercial insurance mistakes and how to avoid them.
4. Work with an Independent Insurance Broker
Here’s where many California business owners leave money on the table: they stick with the same carrier year after year without exploring the broader market.
Workers’ comp pricing can vary from one insurance company to another—even for similar risks. Carriers have different appetites by industry, different underwriting approaches, and different credit/debit structures that affect your final premium.
An independent broker (like ECHO Business Insurance Services) isn’t tied to any single carrier. That means we can shop your policy across multiple insurers to find the best combination of coverage, service, and price for your situation.
What an independent broker can do for you:
- Compare quotes from multiple A-rated carriers
- Identify credits and discounts you may qualify for
- Advocate on your behalf during underwriting
- Help you understand how EMR and claims history affect pricing
Why it matters: The difference between carriers can be substantial—sometimes thousands of dollars per year. If you haven’t shopped your workers’ comp policy recently, you may be overpaying without realizing it.
5. Review Your Policy Annually (Not Just at Renewal)
Your business isn’t static, and your insurance shouldn’t be either. Changes in payroll, headcount, job duties, or operations can all affect your workers’ comp premium. Waiting until renewal to address these changes often means you’ve already overpaid—or you’re caught off guard by an audit adjustment.
Make it a habit to review:
- Payroll estimates vs. actual payroll (to reduce audit surprises)
- Employee headcount and classification accuracy
- New services, locations, or equipment that could change risk
- Claims trends and EMR changes
Pro tip: Schedule a mid-year check-in with your broker. A quick 15-minute call can catch discrepancies early and help you budget more accurately.
For businesses expanding or changing operations, our article on insurance considerations when expanding to a new location offers additional guidance.
Take Control of Your Workers’ Comp Costs Today
Rising workers’ compensation costs in California aren’t going away anytime soon. But with proactive safety programs, smart return-to-work planning, accurate classifications, and the right insurance partner, you can manage your costs effectively—even in a challenging market.
The key is to stop treating workers’ comp as a set-it-and-forget-it expense. Treat it as an active part of your risk management strategy, and you’ll see the difference on your bottom line.
Want to make sure your workers’ comp policy matches your business today?
At ECHO Business Insurance Services, we help small and mid-sized businesses review workers’ comp coverage, confirm class codes and payroll assumptions, and compare competitive options across multiple carriers.
Learn more about workers’ compensation insurance in California, or request a policy review to see if there are opportunities to reduce premium or avoid audit surprises.