What are Workers Compensation Class Codes
Class codes are kept up by the National Council on Compensation Insurance (NCCI), an autonomous association that assembles and breaks down information on laborers’ protection. These are 3 to 4 digit codes that resemble the risk factor of a job.
How do you find a class code?
Check with your state’s insurance agency or the NCCI manual for codes for employees. Alternatively, check with a trusted insurance provider of workers’ compensation policies for detailed information and assistance in getting the correct codes assigned to each worker.
It is best practice to confirm these codes with the manual and ensure all information provided to the company is correct. This information will help determine the dollar amount of your premiums, and paying too little upfront due to incorrect coding can cause substantial bills due at a later time when the policy is audited.
How are class codes used?
Class codes are used as a piece of the formula to determine rates for coverage for an employee based on the risk of their job description. The more risk that is associated with a class code, the higher the rates will be to carry coverage for the employee.
Let’s look at an example:
For a trucking company, you will have truck drivers, office workers, and shop workers.
- The office workers who do not work in a repair shop will see the lowest risk, and be associated with a low-risk code.
- Mechanics and shop workers will have a higher risk code. This is due to chemical exposure, as well as the risk of injury on the job.
- Truck drivers would then have a higher risk code due to the risks on the road. Over the road, truckers would have a higher risk associated than local truck drivers due to added risks while traveling long distances.
Additional factors of each job function can change the code. For instance, if a worker does data entry and clerical work, but their office is located in the mechanic shop, they may be at higher risk.
When can more than one class code apply?
You may have split class codes for employees. This means their assignment falls under more than one classification. Additionally, one of the following guidelines would need to be met in order to have multiple codes assigned to a worker.
- The basic classification of the insured’s principal business requires certain operations or employees to be rated separately.
- The insured conducts one or more of the following business operations:
- Construction or erection
- Employee leasing, labor contracting, temporary labor services
- Mercantile business
- The insured conducts more than one operation in a state.
- An insured business is depicted as leading more than one activity in a state if the segments of the protected’s tasks are not included by the essential arrangement relevant to the guaranteed’s primary business activity.
Making sure your employee class code(s) are correct is so important. If they are incorrect it could be costing you, read more about that in our post “how can I save money on my work comp?”
For more detailed information and rules on classification and use of multiple class codes, check the NCCI library.
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