Workers’ compensation insurance premiums are calculated by workers’ compensation classification codes.

A number (rate) is assigned to each code and is based on an employee’s risk of injury. These codes can be complicated, and if your company employs thousands of workers, it is easy for records to become riddled with errors.

If your company conducts business in multiple states, this only further complicates your workers’ compensation policy. These errors could be raising your company’s workers’ compensation costs.

Most states use the National Council on Compensation Insurance’s classification system. It is sort of a workers’ compensation bureau, independently run, but still funded by insurance companies. Visit their website to see the list of states that participate in their system. The Texas workers’ compensation system, for example, has significant variations in their codes.

The NCCI’s main goal is to classify the overall business, not a particular employee in that business. This could mean that an activities coordinator in a nursing home could be classified as a health care worker even though her risk of exposure to hazardous or infectious material is significantly lower than that of a nurse.

There are some exceptions, however, as there should be. The construction industry is one such industry that is assigned workers’ compensation classification codes according to the actual work performed by the employee. The accountant or receptionist is not assigned the same risk level as a site supervisor who is on site every day. Similarly, there are some codes that are always assigned to particular employees, such as clerical workers, regardless of the industry.

Correctly classifying an employee can be quite difficult, considering all the rules and the fact that the NCCI has established about 600 codes. Rather than taking on this daunting task on your own, consider hiring an independent workers’ compensation auditing company to comb through your workers’ compensation insurance policy and help you assign the proper codes. Improper codes can seriously increase your workers’ compensation costs.

A thorough search of NCCI’s website will show that the details of their classification system is not online or available to the general public unless you pay for their manual or an online subscription.

While this may be a valuable purchase and help you significantly, consider that most independent workers’ compensation auditing companies will work on commission with no upfront fees. If you do not recoup overcharges, you do not pay the company anything.

If you're in California, you can get a copy of those codes here: California Workers Compensation Class Codes