Now, we address the remaining elements that auditors consider essential in ensuring you fully optimize your workers’ compensation premium calculations, highlighting scenarios that often require particular attention and strategic management.
7. Special Treatment for Construction Employers (“One More Exception”)
Construction employers often receive unique treatment in workers’ compensation audits. Instead of being assigned a single basic classification, payroll for construction activities can be separated based on the actual tasks performed by employees. For instance, an employee who paints for fifteen hours per week and installs flooring for the remainder would have their payroll split accordingly.
This post is one in a 3-part series:
To qualify for this treatment, construction employers must keep meticulous records specifying exact hours worked per classification code. Auditors disallow estimates, making precise documentation vital to receiving the intended premium savings associated with this exception.
8. Assignment of Classification Codes
Initially, insurance brokers typically assign classification codes when securing coverage for employers. Brokers discuss the nature of the employer’s work to determine the most suitable code. However, the insurer’s underwriter reviews this assignment to confirm its appropriateness and may suggest alternative classifications if discrepancies or better-fitting categories exist.
If the underwriter identifies a different classification as more suitable, they notify the broker and employer. Upon mutual agreement, the policy is then issued with the corrected classification codes. This collaborative process ensures accurate classification, directly impacting premium accuracy and fairness.
9. Schedule Rating and Policy Adjustments
Once accurate classifications are established, insurers can apply further premium modifications known as “schedule rating.” Schedule rating involves discretionary adjustments based on the unique characteristics of each business, allowing credits (reductions) or debits (increases) to the calculated premium. Factors influencing schedule rating adjustments include:
- Implementation of approved safety programs
- Presence of on-site medical facilities or nursing staff
- Specialized employee training programs
- Unusual operational activities or risks not fully captured in the classification codes
- Workplace cleanliness and safety standards
- Employer cooperation with the insurer’s requests and procedures
The specifics and amounts of credits or debits vary between insurers, making it important for employers to understand these factors clearly. Active collaboration with insurers and a demonstrated commitment to risk management can result in substantial premium reductions.
In Summary:
Understanding the comprehensive audit process—including payroll accuracy, proper classifications, standard and special exceptions, multiple classifications, and customized adjustments—empowers employers to proactively manage their workers’ compensation premiums. Engaging independent premium auditors ensures objectivity, thoroughness, and potential cost savings, allowing businesses to maintain accurate premiums aligned with their true risk profiles.
Taking these steps equips you with the knowledge and tools necessary to achieve fair and cost-effective workers’ compensation insurance.
Contact: mstack@reduceyourworkerscomp.com.
Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/
Injury Management Results (IMR) Software: https://imrsoftware.com/
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