Proper classification of a business for workers compensation purposes is very important to the ultimate cost of that workers comp policy. There are approximately 700 classification codes that are available for use in the classification of your business. Each code has its own rate which is used in the calculation of your workers compensation insurance premium.

Classification is the first step in determining the premium you will pay for your workers compensation insurance.

Any misclassification, by using the wrong workers compensation class code, may increase the cost of your workers compensation policy. So it is very important that your workers comp insurance policy contain the proper work comp codes for your business.

Workers comp codes are a group of four diget codes each representing a specific description of work activity.

For example the NCCI code for Clerical - office is 8810 and the description reads like this: "The code 8810 is applied to clerical office employees provided they are not otherwise classified. So common to business this class code is considered to be a standard exception code. Duties include creation and maintenance of files, record handling, correspondence and telephone duties. A clerical office is an area separated from other work areas and does not apply when in a service area or where inventory is located (other codes apply.)

Another example is NCCI code 5551 - Roofing and the description goes something like this; applies to all kinds of roofing activities with the exception of those activities described later in this section. Include work on all kinds of roofs, flat or sloped. The application of all roofing material types are included in this code. Also includes operations such as waterproofing of roofs, pressure washing of roofs, new roof installation and re-roofs.

So now imagine 700 codes that deal with every possible type of job or work activity description. And now having to put that work activity in a slot as specific as these. A difficult task at best!

Let's start with the obvious, you must review your policy for accuracy. When you receive your workers comp policy, take a few minutes to look over the premium calculation area. It's here where you will find a list of the workers compensation codes, along with a brief description of that code, that is being used on your policy.

Here's a simple one....if you own and operate a furniture manufacturing plant and while reviewing your policy you notice the code used is "Stores - furniture & drivers," then you should know immediately the code being used is wrong and you should contact your insurance agent for an explanation!

But here's where the problem with workers comp codes gets complicated.

Say you're in the contracting business, you run 4 work crews, and your primary business is building new homes. You also do some remodel work and every so often you pick up a commercial job building small retail strip malls. Now this can be complicated! This type of operation may use anywhere from 1/2 dozen to over a dozen workers comp codes on their policy. There may be some workers who perform work duties spread over several codes and the only way that is permitted is with proper documentation of each work activity. Misclassification of workers compensation codes in the construction industry is an every day occurrence and one that costs employers thousands of dollars each and every year.

So, can this employer catch workers comp code errors? You bet he can! He can certainly catch the obvious errors, but in complicated operations like this, it may be the subtle, undetected errors that cost the most.

Ok, so now we know how important it is that the correct workers compensation codes are being used on your policy. It's also important to know where to go when you need professional help with workers compensation policy issues. Workers Compensation Consultants is a professional consulting service that deals with these types of issues every day. So when you feel you need professional help contact: workcompconsultant.com.

I hope the information I've supplied you in this hub is helpful. Thanks!