Understanding Workers Comp Premiums for California Cleaning Companies | WIMC

March 3, 2025

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Understanding Workers Comp Premiums for California Cleaning Companies

When running a cleaning company in California, one of the most important considerations for business owners is managing workers' compensation insurance. Workers' compensation is a mandatory insurance that provides financial support to employees who get injured or ill while performing their job duties. The premiums for workers' compensation insurance are often a significant cost for cleaning companies, and understanding how they are calculated can help you manage your expenses more effectively.

In this comprehensive guide, we’ll take a deep dive into the ins and outs of workers' compensation premiums for California cleaning companies. We’ll explore what workers' compensation insurance is, how premiums are calculated, factors that influence the premium rates, and strategies for reducing premiums. Let’s begin!

What is Workers' Compensation Insurance?

Workers' compensation insurance is a state-mandated program designed to protect employees who suffer from work-related injuries or illnesses. In California, this coverage is required for all employers, regardless of the size of the company or the number of employees. Workers' compensation provides benefits such as:

Medical care for injuries or illnesses sustained on the job
Temporary or permanent disability payments
Rehabilitation services
Death benefits for surviving family members in case of a fatal accident

For cleaning companies in California, this insurance is particularly important because employees often perform physically demanding tasks, work with cleaning chemicals, and are exposed to various hazards. As a result, there’s a higher risk of injuries or accidents, making workers' compensation insurance an essential protection for both employers and employees.

How Are Workers' Compensation Premiums Calculated in California?

The cost of workers' compensation premiums for cleaning companies in California depends on several key factors. Here’s an overview of how premiums are generally calculated:

Classification of Employees: In California, workers’ compensation premiums are based on the classification code assigned to each type of work performed by your employees. For cleaning companies, the most common classification code is 9015, which covers janitorial services and cleaning businesses.Employees are categorized based on the level of risk associated with their job. For example, workers involved in cleaning hazardous environments or handling toxic chemicals may have a higher premium rate compared to those performing less dangerous tasks.
Payroll: Premiums are also tied to the total payroll of your employees. The more you pay in wages, the higher your premium is likely to be. Insurance companies calculate the payroll for each classification of work performed by your employees and then apply the appropriate rate for each group.
Experience Modification Rate (EMR): The Experience Modification Rate (EMR) is a critical factor in determining the cost of workers’ compensation premiums. The EMR is a rating that reflects the company’s claims history in comparison to other businesses in the same industry. If your cleaning company has a history of frequent or severe worker claims, your EMR will be higher, which can lead to higher premiums. On the other hand, if your company has a good safety record with few claims, your EMR will be lower, which can result in lower premiums.The EMR is typically reviewed annually, so maintaining a low EMR is an ongoing effort for cleaning companies.
Risk Factors and Safety Programs: The specific risks associated with your cleaning company’s operations also play a role in determining your premiums. For instance, employees working with hazardous materials or operating heavy equipment will be seen as higher risk than employees who perform office cleaning tasks. Implementing safety programs, offering training to employees, and adopting safety measures like providing personal protective equipment (PPE) can help reduce the likelihood of accidents and injuries, ultimately reducing your premiums.
Claims History: Insurance companies review your company’s past claims history when setting your premium rates. A clean record with few claims can result in lower premiums, while a history of frequent workers' compensation claims can drive premiums up.
Location of Operations: The location of your cleaning company’s operations can also impact premiums. Different areas of California have varying rates based on the overall risk levels associated with the region. For instance, a cleaning company operating in a busy urban area may face higher premiums due to the increased likelihood of accidents compared to one in a quieter, rural area.
Type of Business Entity: The legal structure of your cleaning company—whether it’s a sole proprietorship, partnership, LLC, or corporation—can affect your premiums. For example, owners and officers of certain business entities may be exempt from workers' compensation coverage or may receive a discounted rate depending on the number of employees.

Factors That Influence Workers' Compensation Premiums for Cleaning Companies

Several factors can influence the premiums for your workers' compensation insurance. While some of these factors are within your control, others may be outside of it. Here’s a breakdown of the most important factors that influence premium rates:

Claims History and Experience Modification Rate (EMR): As mentioned earlier, a company’s claims history directly impacts its premium rates. Insurance companies view companies with a high number of claims as riskier and may charge them higher premiums. Conversely, companies with a good safety record can receive discounts on their premiums.
Employee Classification and Job Risk: The types of tasks your employees perform directly affect their risk level, and therefore, your premiums. For example, employees who perform floor cleaning using heavy machinery or work in hazardous environments may be assigned a higher classification and thus a higher premium rate. Cleaning companies must ensure that they have the correct classification code for each type of work to ensure accurate premium calculations.
Payroll and Company Size: Larger cleaning companies with more employees typically pay higher premiums because their total payroll is higher. Payroll is a key component in calculating premiums, so maintaining a steady workforce is essential for accurately estimating costs.
Safety and Risk Management Practices: Implementing strong safety protocols, training programs, and risk management strategies can help reduce the likelihood of workplace injuries. Insurers often offer discounts for companies that actively work to improve safety and minimize risks. Regular safety audits, workplace inspections, and investing in employee training can help reduce accidents and, in turn, lower premiums.
Industry Standards and Regulations: The cleaning industry in California is subject to a range of safety regulations and standards. Compliance with OSHA (Occupational Safety and Health Administration) guidelines and other state-specific requirements can reduce risks and help lower premiums. Failure to meet safety standards can result in higher premiums or even fines, so staying up-to-date with regulations is crucial.

Strategies for Reducing Workers' Compensation Premiums for Cleaning Companies

While workers' compensation premiums can be costly for cleaning companies, there are several strategies you can use to reduce your premiums over time. Here are some of the most effective strategies:

Implement a Strong Safety Program: One of the most effective ways to reduce workers' compensation premiums is by reducing the frequency of workplace injuries. Implementing a robust safety program can help identify potential hazards, prevent accidents, and keep your employees safe. Regular safety training, risk assessments, and providing the necessary protective equipment can go a long way in preventing injuries.
Control Your Claims History: A company’s claims history is one of the most important factors in determining premiums. To control your claims history, focus on preventing accidents and encouraging employees to report injuries promptly. By addressing minor injuries early, you can prevent them from escalating into more significant claims.
Utilize a Preferred Provider Network (PPN): Many insurance providers offer a Preferred Provider Network (PPN) that allows injured workers to receive medical care from a network of approved healthcare providers. By using a PPN, you can often control healthcare costs and improve the outcomes of your workers' compensation claims. This can help reduce your overall claims costs and lower your premiums in the long run.
Reduce Employee Turnover: High employee turnover can result in higher workers' compensation premiums due to the increased training costs and the likelihood of new workers being injured. Reducing turnover and retaining experienced employees can help lower premiums by improving your safety record and reducing the training needs for new hires.
Explore Payroll Allocation Options: Some cleaning companies may find that certain employees, such as office workers or managers, have a lower risk of injury and, therefore, a lower workers' compensation premium rate. By properly allocating payroll among different classifications of workers, you may be able to reduce your overall premium costs.
Consider Group Workers' Compensation Insurance: Some cleaning companies may benefit from joining a group workers' compensation insurance plan, which can offer lower premiums by pooling risks among several businesses. Group insurance plans allow small businesses to access the same benefits and cost savings typically available to larger organizations.