Workers’ compensation class codes are three- or four-digit codes that insurance companies use to estimate rates based on the risk level of work that employees are performing. Workers’ compensation codes are maintained by the National Council on Compensation Insurance (NCCI), an independent organization that gathers and analyzes data on workers’ compensation insurance.
The NCCI establishes and maintains workers’ compensation class codes for hundreds of thousands of business across the United States. Additionally, some states have rating bureaus that have their own sets of workers’ compensation codes.
How are they used?
Workers’ compensation class codes identify the type of work an employee does, and the codes are used by insurers to estimate the hazards associated with particular tasks. For example, a clerical employee who works at a computer (class code 8810) is at less risk of injury than a carpenter who works on upper levels of buildings (class code 5403). As there is less hazard associated with a desk job compared to a construction site job, it costs a company less to insure the clerical worker. In this case, class code 8810 is associated with a less expensive rate than class code 5403.
Workers’ compensation codes are an important part of the formula insurers use to estimate how much workers’ comp insurance will cost. The formula includes:
- Workers’ compensation class code (type of work performed)
- Payroll (size of the company’s workforce)
- Experience modification factor (a company’s history of workers’ comp claims)
Finding the correct class codes
If you’re a business owner, it is critical that you use accurate workers’ comp class codes to categorize your employees. Improper or incomplete coding can be a costly mistake. Inaccuracies in coding will be discovered during annual insurance audits, and business owners will be held responsible for making up the financial difference. Furthermore, deliberately falsifying a code is considered fraud and can result in fines or even prison time.
Be sure to take the time to properly code employees, and consider that workers who have multiple roles may need to have a split code. Remember also that when employees’ responsibilities change, their codes may also need to be adjusted. Business owners should contact their state’s insurance department or invest in the NCCI manual to find the correct workers’ comp class codes for their employees.
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