Workers comp insurance costs more for some businesses than others — and the difference can be dramatic. Understanding how rates are calculated helps you know whether you’re paying a fair price, and what you can do to bring your premium down.
The Basic Formula
Workers comp premiums are calculated using a straightforward formula: (Payroll ÷ 100) × Class Code Rate × Experience Modifier = Premium. Each piece plays a role in your final cost.
Payroll
The more payroll you have, the higher your premium. Your payroll is reported at the start of each policy year and verified at the end through an audit.
Class Codes
Every type of work gets assigned a class code. A roofer has a different code than an office worker. The code determines the base rate per $100 of payroll. Roofers might pay $15–$25 per $100 of payroll. Office employees might pay $0.20–$0.50. Getting the wrong class code assigned is one of the most common reasons businesses overpay for workers comp.
Experience Modifier (EMR)
The experience modifier is a multiplier based on your claims history compared to similar businesses. A mod of 1.0 is average. Under 1.0 means fewer claims and a discount. Over 1.0 means higher claims and a surcharge. A business with an EMR of 0.85 pays 15% less than average.
How Comp Matters Can Help
Tricia Baratta spent 17 years as a workers comp policy expert at Travelers Insurance — she knows exactly how carriers price policies and where businesses get overcharged. At Comp Matters Inc., we review your classifications, shop multiple carriers, and make sure you’re paying what’s fair. Call (631) 248-2500 for a free workers comp quote today.
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