If you’re a contractor or business owner, understanding how your workers’ compensation (WC) rate is calculated is key to managing your overall insurance costs. The process isn’t random. It’s based on several measurable factors that reflect the level of risk in your operations.
Classification Codes and Rates
Every job role is assigned a classification code by the Pennsylvania Compensation Rating Bureau (PCRB). These codes help insurers determine the level of risk associated with specific work duties. Higher-risk jobs, such as framing or roofing, typically have higher base rates than lower-risk roles like office staff.
Each classification code has a base rate. That base rate is then multiplied by each individual carrier’s filed multiplier to arrive at the carrier-specific rate per class code. This rate is then applied to every $100 of payroll in that category. For example, if your employee falls under a code with a $5.00 rate and you have $100,000 in payroll for that job, your starting premium would be $5,000.
Experience Modification Factor
Also known as the “mod,” this factor compares your company’s actual claims history to the expected performance of similar businesses. A mod of 1.00 means your actual loss experience matches up with expected loss experience for companies of similar size and classification. A lower mod can reduce your premium, while a higher mod can increase it. This is one of the most influential components of your rate and reflects your company’s commitment to safety and claims management.
Other Influencing Factors
Insurers may also apply credits or debits based on safety programs, loss control practices, and risk management efforts. If you participate in a group program like the PBA Workers’ Comp Program, you may benefit from cost savings through group purchasing power, potential dividends, and experienced claims oversight.
Why It Matters
Knowing how your rate is calculated helps you make informed decisions. Proper job classification, accurate payroll reporting, and maintaining a strong safety record can all contribute to better outcomes for your business.
To learn how the PBA Workers’ Comp Program can support your business, contact us today.
