The basic formula
Each job classification has a rate, expressed per $100 of payroll. Premium starts as the rate times payroll divided by 100 for each class, added together. Rates differ widely: a clerical class is a small fraction of the rate for roofing or tree trimming.
Rates are filed by insurers based on loss costs published by a rating bureau, which is NCCI in many states and an independent bureau in others such as California, New York, New Jersey and Pennsylvania. That is why the same job can cost very different amounts in different states.
Adjustments that raise or lower the premium
An experience modification factor compares your past claims with similar businesses. A mod below 1.00 lowers premium and above 1.00 raises it. Smaller businesses may not qualify for a mod yet.
Insurers may also apply schedule credits or debits for safety programs and operations, premium discounts for larger policies, and state-mandated fees or assessments. Many carriers also have a minimum premium.
Why the final price changes at audit
The premium on your policy is an estimate based on projected payroll. After the policy period ends, the insurer audits actual payroll, and the difference becomes a refund or an additional bill.
Ways employers keep rates in check
- Make sure each employee is in the correct class code
- Separate clerical and outside sales payroll where allowed
- Collect certificates from every subcontractor
- Report injuries promptly and use return-to-work programs
- Keep a written safety program and train new hires
Frequently asked questions
Why don't you list a price per employee?
Because there isn't one. Workers comp premium depends on the type of work, payroll, state and claims history, so any flat number would be misleading. A quote based on your details is the only reliable figure.
Do rates change every year?
Rating bureaus and insurers review rates regularly, and your own payroll and experience mod change too. Expect your premium to be recalculated at each renewal.
Can I lower my experience mod?
Over time, yes. Mods are based on several years of claims, so preventing injuries and managing claims well gradually improves the factor.