Workers’ Compensation Rate Updates: What Construction Teams Need to Know

Workers’ compensation rate updates directly impact the bottom line for construction companies. Understanding how these rates are determined, managing workplace safety, and monitoring the Experience Modification Rating (EMR) can help businesses control costs. In this post, we will break down the key factors influencing workers’ compensation rates and provide actionable tips to keep your rates manageable.

How Are Workers’ Compensation Rates Determined?

Workers’ compensation rate updates depend on several factors. Insurance providers calculate rates based on risk, claims history, and industry standards. Construction companies often pay higher rates because the industry involves significant risks, including physical injuries and accidents.

Key Factors Influencing Workers’ Compensation Rates

1. Classification Codes – Each job role in a construction company is assigned a classification code. These codes reflect the level of risk associated with specific tasks. For example, a roofer will have a higher rate than an office administrator.
2. Payroll Amount – Workers’ compensation premiums are calculated as a percentage of payroll. Higher payroll totals result in higher premiums.
3. Claims History – Frequent claims can increase your rates. A clean safety record demonstrates lower risk and often leads to better rates.
4. State-Specific Regulations – Workers’ compensation laws vary by state. These regulations influence the minimum and maximum rates an insurer can charge.
5. Experience Modification Rating (EMR) – The EMR is a key factor in determining rates. It reflects a company’s claims history compared to industry averages. A lower EMR indicates fewer claims and results in lower premiums.

Tips for Keeping Workplace Incidents Low

Safety should be a top priority for every construction company. Reducing incidents not only protects your workers but also helps manage workers’ compensation rate updates. Here are some strategies to foster a safer work environment.

Implement a Comprehensive Safety Program

A well-structured safety program can significantly reduce workplace accidents. Make sure your program includes the following elements:

• Regular Safety Training: Provide ongoing training to all employees. Focus on hazards specific to construction, such as falls, equipment misuse, and material handling.
• Clear Communication: Use signage, meetings, and digital tools to share safety protocols with your team.
• Emergency Response Plans: Prepare workers for potential emergencies. Conduct drills and provide clear instructions on how to handle incidents.

Conduct Routine Safety Audits

Regular safety audits help identify risks before they lead to accidents. Assign a team like the one below to build a plan together and inspect worksites weekly. Use checklists to evaluate:

• Equipment standards and conditions
• Proper use of personal protective equipment (PPE)
• Adherence to safety protocols

Encourage Employee Accountability

Create a culture where every team member feels responsible for safety. Empower employees to:

• Report unsafe practices
• Suggest safety improvements
• Support coworkers in following protocols

Invest in Equipment Maintenance

Faulty equipment increases the likelihood of accidents. Perform regular maintenance to ensure that all tools and machinery are in good working condition. Replace worn-out items immediately.

Limit Fatigue and Overexertion

Fatigue leads to mistakes. Rotate shifts to avoid burnout and schedule mandatory breaks during long shifts. Ensure tasks are evenly distributed among workers to prevent overexertion.

Understanding the Importance of EMR

The Experience Modification Rating (EMR) is a metric that insurers use to assess your company’s risk. It compares your claims history to other companies in your industry. Understanding your EMR is essential for controlling workers’ compensation rate updates.

To access your Experience Modification Rating (EMR), you would typically need to log in to your workers’ compensation insurance company’s online portal or contact them directly, as they are the ones who calculate and provide your EMR based on your claims history; however, the National Council on Compensation Insurance (NCCI) website offers a product platform called “Riskworkstation” where you can access your EMR information if your insurance carrier uses their services to calculate ratings.

How Is EMR Calculated?

1. Claims Data – Insurers review your company’s claims data over a three-year period. They consider the number of claims, their severity, and their cost.
2. Industry Benchmarks – Your claims history is compared to industry averages. If your claims are lower than average, your EMR will be below 1.0. If they are higher, your EMR will exceed 1.0.
3. Payroll Data – Payroll amounts are factored into the calculation to normalize the data across companies of different sizes.

Why EMR Matters

• Lower EMR Means Lower Rates: A low EMR reduces your workers’ compensation premiums.
• Competitive Advantage: Many clients prefer to work with contractors who have a low EMR because it indicates a safe and reliable workforce.
• Compliance Requirements: Some projects require contractors to maintain an EMR below a specific threshold.

Tips to Improve Your EMR

1. Focus on Injury Prevention: Preventing injuries is the most effective way to keep your EMR low. Use the safety tips outlined earlier to reduce incidents.
2. Report All Incidents Promptly: Timely reporting helps insurers resolve claims efficiently. Delayed reporting can lead to higher costs and a negative impact on your EMR.
3. Reevaluate Claims Closures: Work with your insurer to ensure claims are closed promptly once resolved.
4. Engage in Return-to-Work Programs: Help injured workers return to modified roles as they recover. This reduces the overall cost of claims.

Stay Informed About Rate Updates

Workers’ compensation rate updates are inevitable. Staying informed helps you prepare for changes and adjust your budget accordingly.

How to Monitor Rate Updates

• Communicate with Your Insurer: Regularly check in with your insurance provider for updates.
• Review State Regulations: Monitor changes to workers’ compensation laws in the states where you operate.
• Consult Industry Resources: Use resources like the National Council on Compensation Insurance (NCCI) to stay updated on trends and benchmarks.

Budgeting for Changes

• Anticipate Rate Increases: Set aside funds to accommodate potential increases in workers’ compensation premiums.
• Review Claims History Annually: Analyze claims data to identify patterns and address issues proactively.
• Consider Policy Adjustments: Work with your insurer to explore discounts or alternative policy options based on your safety record.

Workers’ Compensation Rate Updates Can Be Managed

Workers’ compensation rate updates don’t have to catch your construction company off guard. By understanding how rates are determined, improving workplace safety, and monitoring your EMR, you can control costs and maintain a competitive edge. Implement safety programs, conduct regular audits, and prioritize employee accountability to minimize incidents. Stay informed about changes in regulations and collaborate with your insurer to adapt to updates effectively.

Take proactive steps today to protect your workforce and your budget. These strategies will help your construction company thrive, even as workers’ compensation rate updates continue to evolve.

The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.