How do you find a class code?
A work comp class code is typically a 4 digit number that is a representation of the type of work that you do. These codes are state specific and the largest repository of this data is the National Council on Compensation Insurance (NCCI), an association that maintains this information for approximately 35 states.
You can verify your correct work comp code with a trusted insurance provider of workers’ compensation policies. It’s imperative that each worker be assigned the correct classification.
TIP: 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 one 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 may have truck drivers, office workers, and shop workers.
The office workers have low risk and will 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 – they have risks on the road. If we go a step further, over the road truckers would have a higher risk than local truck drivers, due to added risks while traveling long distances.
TIP: keep in mind that 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 guarantee’s primary business activity.
For more detailed information and rules on classification and use of multiple class codes, check the NCCI Library.
Why does identifying the right class codes matter for your business?
Now that you know what class codes are and how to find them, why does the right classification matter?
- Accurate Premium Calculation. Correct class codes ensure businesses pay the right workers’ compensation premiums, avoiding overpayment or underpayment.
- Compliance with Regulations. Properly assigned class codes ensure businesses meet legal requirements for workers’ compensation coverage, preventing penalties or legal issues.
- Risk Management. Class codes help assess and manage risks associated with different job roles. This allows businesses to implement safety measures and mitigate workplace accidents.
- Claims Management. Assigned class codes determine eligibility, coverage, and benefits for workers’ compensation claims, ensuring fair compensation while preventing fraud.
- Cost Control. Accurate class codes help businesses control workers’ compensation costs by reflecting changes in job duties and preventing coverage gaps.
How do you make sure class codes are accurate?
- Understand the Job Duties. Start by thoroughly understanding the job duties and responsibilities of each employee in your organization. This includes assessing the specific tasks they perform and the level of risk associated with those duties.
- Research Class Code Guidelines. Familiarize yourself with the class code guidelines provided by your state’s workers’ compensation regulatory authority. These guidelines outline the criteria for assigning class codes based on different occupations and job functions.
- Consult Classification Resources: Utilize classification resources provided by your insurance carrier, such as their classification guide or online tools. These resources offer detailed descriptions of various job roles and the corresponding class codes.
- Conduct Employee Interviews. Engage in conversations with your employees to gain further insights into their daily tasks. They may have a better understanding of the nuances of their roles. Ask specific questions about their job duties, equipment used, physical exertion, and any potential hazards they encounter.
- Seek Professional Assistance. If you’re uncertain about the correct class codes for certain job roles, consider consulting an insurance agent or specialist experienced in workers’ compensation. They can provide guidance based on their expertise and knowledge of industry-specific requirements.
- Regularly Review and Update. Class codes may need to be reviewed and updated periodically, especially if job duties change or new positions are added. Stay proactive in reassessing your employees’ roles to ensure that the assigned class codes remain accurate.
- Communicate with Insurer. Maintain open lines of communication with your insurance carrier. Inform them about any changes in your business operations or job roles to ensure they have up-to-date information for accurate premium calculations.
By following these steps, you can help ensure that your assigned class codes accurately reflect the nature of the work being performed. This will help to reduce the risk of misclassification, ensure compliance, and could save you money.