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Understanding The Workers Comp Class Code: A Guide For Businesses
What Is A Workers Comp Class Code?
A workers comp class code is a four-digit numerical code assigned to businesses by their workers compensation insurance companies.
For example: Class Code 5535, Sheet Metal Work-Installation & Drivers
Workers comp class codes can also be assigned to you by the "Rating Bureau" in your state if you are one of the few businesses selected for an NCCI Inspection.
Workers compensation rating bureaus, such as the National Council on Compensation Insurance (NCCI) or the Workers Compensation Insurance Rating Bureau (WCIRB) in California, created and maintain the system of manuals, rules, etc, but they are rarely the organization who truly classifies your business operations.
NCCI is the "Rating Bureau" for 35 of the 50 states. As a result, you will also hear workers comp class codes referred to as NCCI Codes or NCCI Classification Codes.
These work comp class codes categorize employees based on the type of work they do, and they can be industry specific or industry neutral. For example, all industries have clerical office employees which is class code 8810. Carpentry, 5403, is specific to the Construction Industry. Most workers comp codes, however, are industry specific.
Why Do Workers Comp Class Codes Matter?
Work comp class codes are important because they (along with payroll) are the primary driver of premiums; how much you pay for Workers' Compensation Insurance. Here are some work comp class codes used in the discussion below and the rates currently charged in Illinois for these codes by the Travelers Property Casualty Company of America.
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$2.69/100 payroll - WC Class Code 9102 Lawn Maintenance—Commercial or Domestic & Drivers
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$0.74/100 payroll - WC Class Code 8869 Child Care Center—All Employees Including Clerical, Salespersons & Drivers
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$1.88/100 payroll - WC Class Code 8826 Nursing Homes or Assisted Living Facilities-All Other Employees, Salespersons & Drivers
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$1.90/100 payroll - WC Class Code 8824 Nursing Homes or Assisted Living Facilities-Healthcare Employees
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$0.08/100 payroll - WC Class Code 8810 Clerical Office Employees NOC
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$4.70/100 payroll - WC Class Code 6217 Excavation & Grading
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$7.96/100 payroll - WC Class Code 0042 Landscape Gardening & Drivers
These work comp class codes categorize similar businesses based on the work their employees perform. The dollar rate directly reflects the risk of workplace place injury based on a particular classification code. A higher-risk classification, such as a construction classification code, will result in higher premiums compared to lower-risk occupations, like office, desk work.
Properly classifying businesses is crucial beyond simply what you pay.
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It's important that you and your direct competitors have been properly classified so as to not unfairly advantage or disadvantage businesses. Considering the rates above, imagine if you were classified under 0042 Landscape Gardening while your fiercest competitor was misclassified under 9102 Lawn Maintenance. You would be paying more than double your competitor for the same insurance.
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Take the example above and imagine you and your fiercest competitor were submitting a proposal for the same landscaping project and you had to quote based on $7.96/100 and your competition $2.69. Your ability to win projects and generate revenue would be severly compromised.
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Also, it's important for the integrity of the whole workers' compensation system for employers to be classified properly. To use an extreme example say a substantial number of roofers were accidentally grouped with office workers. The pool of office workers would inevitably reflect elevated claims (costs) while the corresponding pool of roofers would reflect lower claim costs with members classified incorrectly in another code; Clerical. That would increase the rate everybody pays for Clerical Office Workers while the rates for roofers lower; which may be insufficient for insurance companies to pay those claims.
So, misclassification can lead to significant financial consequences. What everyone ought to know about an NCCI Code is that classification errors are not uncommon, and there are ways to protect your business.
NCCI Classification Inspection Program
Properly classifying employers for workers compensation insurance purposes is important for the reasons cited above. NCCI manages its own Classification Inspection Program through the NCCI inspections performed every year. The published results alway include a "Top 10 List" of the the most misclassified work comp class codes of the year.
It's an interesting list because new work comp class codes enter the list every year while other work comp class codes repeat. For example, work comp class code 9015 and class code 9012 appear on the list, seemingly, every year.
Work Comp Class code 9015 (Building Or Property Management - All Other Employees) is commonly applied where Class Code 9012 (Building Or Property Management - Property Managers And Leasing Agents And Clerical, Salespeople) should be instead. It's difficult to see how this continues to be a problem because 1) NCCI notifies the public of its findings every year and 2) Work Comp Class Code 9015 is substantially more expensive than Work Comp Class Code 9012. One would think that employers would be quick to learn of such cost saving opportunities.
Workers Compensation Class Code Lookup Table
Below you can conduct a class code search on all Workers Comp Class Codes by either typing a description or 4-digit classification code number.
Note that the Workers Compensation Code List table is set up to show 5 class code search results that include both the workers comp code "caption" and the "numerical code." And, if you type something general like "manufacturing" into the search bar, you'll get a lot more than 5 results. Use the arrow in the upper right to scroll through all of the workers comp codes that results from your search.
Anatomy Of A Workers Comp Class Code
Workers Comp Class Code - Governing And Companion Codes
If you would like to bookmark this table or link to it from your website, the url is:
https://www.cytrongroup.com/workers-comp-class-code#classcodelookuptable
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Governing Classification Code
Your Governing Workers Comp Class Code should describe your business' primary operations. It is normally the classification code that generates the most premium. In some states it's the classification code that contains the most payroll. One would think that the code that contains the most payroll would also be the code that generates the most premium, but that is not always the case.
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Companion Classification Codes
Companion Codes in workers' compensation insurance are secondary workers comp codes that are used in conjunction with your Governing Classification Code. These workers comp codes apply to specific types of work that are part of a business' operations but not directly covered by the governing classification. Companion codes are common and necessary due to businesses engaging in related activities that have different risk profiles.
For example, a manufacturer that also has its own delivery operation might have a governing workers comp class code for it's manufacturing operation and another code to cover it's delivery personnel. That would make sense due to the employees having very different duties with diverging workplace safety risks.
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NCCI Companion Classification Code Guidance
The NCCI Scopes Manual which lists and explains in detail all of the possible workers comp class codes gives guidance regarding common governing and companion code relationships. A nursing home or assisted living facility operator, for instance, would classify all of its healthcare employees under Workers Comp Classification Code 8824 (Nursing Homes or Assisted Living Facilities-Healthcare Employees). The Manual will name all of the roles and duties that are performed by these skilled nursing professionals.
Additionally, as a possible companion code, the Manual adds "Food service employees and all other employees performing nonhealthcare activities are to be separately rated to Code 8826." These types of senior care operations normally have food service, and the manual instructs how to classify those employees who don't belong in the Governing Classification Code. That is a good example of a Governing Classification Code alongside a Companion Classification Code and the direction that the NCCI Scopes Manual gives to help properly classify employees.
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One more example of Workers Compensation Classification Codes
Say you have a landscaping company whose core business involves:
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Laying out grounds
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Planting flowers, lawns, shrubs, or trees
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Clearing, grading, and planting for new landscapes
These are full-scale landscaping projects for which this company's Governing Workers Comp Class Code would be 0042 "Landscape Gardening & Drivers." 0042 is one of many high rated construction workers comp codes.
However, it is very common for a company like this to also have clients who require routine maintenance of existing grounds. These activities could include:
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Lawn mowing
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Trimming shrubs or small trees (from the ground)
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Aerating, raking, and thatching lawns
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Applying fertilizers or insecticides
The Manual classifies these activities, maintenance of existing grounds, under Workers Comp Class Code 9102 "Lawn Maintenance—Commercial or Domestic & Drivers."
And, to make things even more interesting, let's say this landscaping company also performs excavation, filling and backfilling work. Another separate rating (Classification Code) is required for this activity; Workers Comp Class Code 6217 "Excavation & Grading."
All three of these activities require a different code because they have established a different "risk profile." They will reflect different rates due to varying safety hazards, frequency of claims, and severity of claims experienced.
Workers Comp Class Code - Standard Exceptions
Standard Exception Codes are used for employees who are excluded from the Governing Classification Code. These are roles that are common to all industries whose job duties have minimal safety related risk.
The most common standard exception codes are:
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Clerical Office Employees (Workers Compensation Code 8810): Employees who work in an office setting with no exposure to the main operations of the business. These workers have very low risk of injury compared to those involved in physical labor.
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Outside Salespersons (Work Comp Class Code 8742): Employees whose primary job is selling products or services outside of the business premises, with minimal physical risk.
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Clerical Telecommuter Employees (Work Comp Class Code 8871): This applies to clerical telecommuter employees who meet specific criteria related to their clerical duties and work environment. However, if these employees are covered under another work comp class code that includes clerical work (e.g. Code 8832, "Physician & Clerical"), they would not be assigned Work Comp Class Code 8871.
These workers comp codes are "exceptions" because they exclude these employees from being "rated" (classified) under the higher-risk governing and companion classification codes that apply to the business' core operations. These employees are physically separated from exposure to the operation's safety hazards. By assigning these workers comp codes, companies can ensure their workers' compensation premiums accurately reflect the lower risk of these employees.
If you consider the above example of an Assisted Living Facility operator with a Governing Class Code of 8824 and a Companion Class Code of 8826, you'll also find Workers Comp Code 8810 on this workers compensation insurance program for the Clerical Office Employees. Those employees performing executive functions, accounting, etc. who are separated from the exposures (safety risks) that the health care and food service employees are exposed, will fall under this Standard Exception Class Code.
Workers Comp Class Code - "All Employees" - Standard Exceptions Not Allowed
Once in a while a business will be assigned an "All Employees" classification code which is used when a classification applies to every worker involved in an operation, regardless of their specific job duties. For these classifications, standard exceptions such as clerical (Code 8810), sales (Code 8742), or clerical telecommuter (Code 8871) cannot be applied. Neither would any seemingly applicable companion code. This means all employees, regardless of whether their jobs involve higher risk or typically low-risk activities, are classified under the same code.
These workers comp codes are applied to operations where it's challenging to separate employee activities by hazard exposure, such as in some contracting or manufacturing businesses where everyone is involved in the core operations, or businesses like transportation where all employees contribute directly to the same end activity. For Example:
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Trucking—Oil Field Equipment—All Employees & Drivers (Code 7222)
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Trucking—Mail Parcel or Package Delivery—Under Contract With the US Postal Service—All Employees & Drivers (Code 7232)
The rules specify that the application of these "All Employees" codes ensures the appropriate rating for businesses whose entire workforce is involved in unified operations, thereby reflecting a singular risk profile. Here are a few more of many examples:
Code 8835 Home, Public, and Traveling Healthcare—All Employees
Code 8869 Child Care Center—All Employees Including Clerical, Salespersons & Drivers.
Code 9044 Casino Gambling—Hotel—All Employees & Clerical, Salespersons, Drivers
NOC Workers Compensation Class Codes
NOC Workers Comp Class Codes are used when no precise or detailed classification exists for a business' unique operations. In other words, the business doesn't fit nicely into any of the other specifically defined class codes. NOC stands for "Not Otherwise Classified" and these catch-all codes provide flexibility within the workers comp classification system.
NOC Workers Comp Class Codes are widely used and common across various industries because there are many unique or mixed operations. NOC codes can be found in industries such as construction, manufacturing, mercantile operations, and even professional services. To give you a few examples:
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WC Class Code 5403 – Carpentry NOC
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WC Class Code 5022 – Masonry NOC
NOC Manufacturing Class Codes:
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WC Class Code 3146 – Hardware Mfg. NOC
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WC Class Code 4484 – Plastics Mfg. – Molded Products NOC
NOC Mercantile Operations Class Codes:
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WC Class Code 8046 – Automobile Parts and Accessories NOC & Drivers
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WC Class Code 8010 – Store – Hardware NOC
NOC Professional Services Class Codes
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WC Class Code 8601 – Engineers NOC
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WC Class Code 8720 – Inspection of Risks for Insurance or Evaluation Purposes NOC
One last thing about NOC Workers Comp Class Codes is that NCCI only wants NOC codes applied after careful review for more specific, applicable codes. They say on their website: "It is imperative to verify that another classification does not specifically describe an employer’s business before assigning an NOC code."