Resources & Insights

How to Save On Your Workers’ Compensation Premiums

May 19, 2020

Brian Parks,
President, Commercial Lines

Once the coronavirus pandemic recedes – as it surely will, eventually – lots of companies will move at least a handful of their previously on-site workforce to permanently remote positions.

That’s based on the responses of more than 300 CFOs surveyed by Gartner, the huge research and advisory company.

You, too, might be thinking about doing this, given some of the cost-savings of a remote workforce.

Should that be the case, your IT and real estate budgets aren’t the only places where you’re likely to save. There’s also the potential to cut your workers’ compensation premiums.

To understand how, let’s spend a moment or two first going through how your insurer calculates your workers’ comp premiums. There are three major components to this:

  1. Classification code and rate. These two are entwined. Your company’s class code is based on your industry and the type of work your employees perform. A receptionist’s class code won’t be the same as someone assigned to operating heavy machinery. Each class code gets a corresponding rate based on the level of risk inherent in that job.
  2. Payroll. This means exactly what it always does: total compensation – including vacation and sick pay – for the coming year.
  3. Experience Modification Factor. Typically based on a three-year look, a lower e-mod reflects a good safety record and minimal claims. A higher e-mod suggests higher-than-average losses. You can guess which is better for your pocketbook.

The equation at the heart of things then is: Rate x (Payroll/100) x E-mod = Premium.

So how do staffing or payroll changes impact workers’ comp?

Well, as duties and responsibilities – and locales – change, employees’ classification codes also change. The codes might have been correct when the policy was issued but as workers shifted into new roles, there’s the distinct possibility of a misclassification cropping up.

More to the point, when an employer has somehow changed their business operations, is doing something different or new, that, too, can cause a misclassification.

As you might imagine, misclassification of workers’ compensation codes costs employers untold amounts every year.

It is, of course, illegal to misclassify employees in hopes of obtaining a lower workers’ comp rate. But employers making changes in payroll, job roles, locales and pretty much anything else involving operations will want to ask their broker to do a quick code classification review and make sure all is right.

Brian Parks is the president of CCIG’s Commercial Lines department. Reach him at or at 720-330-7923. You can also connect with Brian on LinkedIn.

CCIG is a Denver-area insurance, employee benefits and surety brokerage with clients nationwide. We do more than make sure you have the right policy. We help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.


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