Workers' Compensation

Payroll, class codes, the mod, and the annual audit

Workers' compensation premium is arithmetic: for each job classification, a rate per hundred dollars of payroll, multiplied by the payroll in that class, multiplied by your experience modifier. That structure explains almost everything about the policy. Payroll is estimated up front and audited after the term, so the premium is provisional all year. Class codes are the biggest single lever — an office employee and a roofer are separated by an order of magnitude, and misassigned codes are the most common error we find on a policy we take over.

The experience modifier compares your claims history to the expected losses for a business of your size and class. Above 1.0 you pay a surcharge, below it you pay a credit, and it is computed from a rolling window of past years — meaning a bad claim follows you for years after it closes, and a good record compounds. Frequency of small claims moves the mod more than a single severe one, which is why reporting early and getting people back to work on modified duty matters financially as well as humanely.

A claim starts with the report, and speed is the variable you control. Injuries reported the same day cost dramatically less than the same injury reported three weeks later, because the medical care is directed, the facts are fresh, and the employee is not left in the dark. Post the carrier's claim number where staff can see it and tell supervisors that reporting an injury is never the wrong call.

Two audit landmines. Subcontractors who cannot produce their own certificate of insurance get counted as your payroll, at your class rate, at audit — collect certificates before the work starts, not at year end. And owners, officers, and family members have specific inclusion and exclusion rules that vary by state; if a general contractor is demanding a certificate from a one-person operation, there is usually a way to structure that, and it is worth a phone call rather than a guess.