Every workers' compensation policy is built on classification codes. These numbers describe the type of work your employees do, and each one carries a rate that reflects the injury risk of that work. A clerical office worker and a roofer face very different hazards, so their payroll is rated very differently.
Getting the classification right is one of the most important parts of an accurate workers' comp premium. This guide explains how class codes work, how they affect cost, and what to do if you think yours are wrong.
A workers' comp class code is a number assigned to a category of business operations or job duties. Insurers use class codes, along with your payroll, to calculate premium. In simplified form:
Premium starting point = (payroll ÷ 100) × rate for that class code
That figure is then adjusted for factors such as your experience modification, any schedule credits or debits, and premium discounts, taxes and fees. The rates themselves vary by state and by insurer.
Class code systems are maintained by rating organizations. Many states use the classification system of the National Council on Compensation Insurance (NCCI). Some states maintain their own bureau and codes. California, for example, uses the classification system of the Workers' Compensation Insurance Rating Bureau of California (WCIRB). The same type of work can carry a different code number and description depending on the state.
Classification generally starts with the business as a whole, not each employee's title. The rating rules assign a governing class that most accurately describes your overall operations. Separate codes may apply to certain employees, most commonly:
In construction, classification often follows the specific trade being performed, and some systems split codes by wage level or type of work.
It appears on your policy's declarations page or information page. If you don't have a policy yet, your agent will recommend classifications based on your operations.
Yes. Many businesses have a governing class plus standard exception codes such as clerical or outside sales, and some have additional codes under the rating rules.
No. Many states use NCCI codes, while some, including California, use their own classification system.
A misclassification can lead to overpaying, or to an additional premium at audit if payroll is moved to a higher-rated code. Contact your agent to review it.
Your class codes and payroll determine your expected losses, which are part of the experience mod calculation.
Not sure your class codes fit your work? Send us your operations and payroll details and we'll review your options.
WCFL Insurance Services is an independent insurance agency (CA License #6002332), not an insurance company. Quotes and coverage are subject to insurer underwriting, and requirements vary by state. This page is general information, not legal advice; the policy governs coverage.