Workers' Comp Class Codes and Cost

Premium ≈ (payroll ÷ 100) × class rate × experience mod, plus premium discounts, minimum premium and state assessments. Example: $200,000 payroll at a $3.00 rate with a 1.00 mod is about $6,000 before fees. That's arithmetic, not a rate for any state.

Maryland, Virginia, Florida and West Virginia use NCCI's classification system. Pennsylvania (PCRB) and New Jersey (NJCRIB) run their own systems with different code numbers, so the codes below may not match there.

Once you have enough premium history, the rating bureau compares your losses to similar businesses. A mod under 1.00 lowers premium; over 1.00 raises it.

At audit, payroll for uninsured subcontractors is often added to your own. Collect a certificate of insurance from every sub.

Once a business has enough premium history, the rating bureau calculates an experience mod by comparing your actual losses with the expected losses for your class codes and payroll. It's generally based on three years of data, excluding the most recent year. A mod below 1.00 lowers premium and a mod above 1.00 raises it. Claim frequency hurts more than one large claim, because small claims count more heavily in the formula. That's why reporting promptly and getting people back to work matter so much.

Each employee is generally assigned to the code that describes the business's operations, with standard exceptions such as clerical office (8810) and outside sales (8742) in NCCI states. If a code looks wrong, ask your agent to review it before the audit. Misclassification is one of the most common causes of overpaying or of a surprise audit bill. Pennsylvania (PCRB) and New Jersey (NJCRIB) use their own codes.

Workers' comp premium is generally payroll ÷ 100 × the rate for each class code, adjusted by your experience modification factor (if you qualify), schedule credits or debits, and premium discounts, plus state assessments and fees. Rates are filed by insurers or set by rating bureaus such as NCCI, Pennsylvania's PCRB and New Jersey's NJCRIB. See workers' comp class codes and cost for details.

The premium you pay up front is a deposit based on estimated payroll. After the policy ends, the insurer audits actual payroll and subcontractor costs and bills or refunds the difference. Underestimating payroll just moves the cost to an audit bill later.

If you hire subcontractors who don't have their own workers' comp, most insurers will add what you paid them to your payroll at audit and charge you for their class codes. In many states the hiring contractor can be held responsible for an uninsured sub's injured workers. Collect a current certificate of insurance from every sub before they start, and keep it with your audit records.

Get the employee medical care first. Then report the injury to your insurer promptly; state rules set deadlines for employer reporting, and early reporting tends to keep claims smaller. Document what happened, keep in touch with the injured worker, and offer light-duty work when the doctor allows it, since getting people back to work is one of the most effective ways to control claim costs and your future experience mod.

Your FEIN, entity type and owners (and whether owners want to be included or excluded), payroll by job type for the last year and the coming year, subcontractor costs and whether subs carry their own coverage, any prior workers' comp loss runs, and a description of operations. With that, we can quote online through NEXT or Coterie or shop the class with several insurers.

Whether owners count toward the employee threshold, and whether they can be included or excluded, depends on the state and the type of entity (sole proprietor, partnership, LLC or corporation). Including an owner adds their payroll (often at a state-set minimum or maximum) but gives them benefits if they're hurt on the job. Excluding them lowers premium but leaves them uncovered, and some general contractors won't accept excluded owners on site. Check your state's rule on requirements by state.

A standard policy has Part One (statutory benefits) and Part Two (employer's liability, which covers lawsuits connected with employee injuries). Common limits are $100,000/$500,000/$100,000, and many contracts require $500,000 or $1,000,000. If employees travel or work in other states, ask about Part Three (other-states coverage) so a job across the state line doesn't leave you uninsured. Ohio and the other monopolistic states are handled differently; see Ohio stop-gap.

Working without required coverage can bring state penalties, stop-work orders (Florida's Division of Workers' Compensation issues them on job sites), and personal liability for an injured worker's medical bills and lost wages. It can also cost you contracts, because most general contractors and property managers won't let an uninsured vendor start work. Coverage can often be bound the same day.

• NCCI – Basic Manual classification and rating overview
• Pennsylvania Compensation Rating Bureau (PCRB)
• New Jersey Compensation Rating & Inspection Bureau (NJCRIB)