What are class codes?

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🔎 What are class codes for workers’ comp?

Workers' comp class codes are three or four digit codes assigned to job types and businesses. Knowing the class codes for your job is key to figuring out what your workers' comp insurance will cost.

🔎 What is a class code?
A class code is a random four digit number that is assigned to every industry, job, role, and type of business. The number can vary from state to state. Think of it as a barcode for every state to reference a certain type of business.

🔎 Who makes them up the class codes?
The list is created and maintained by the NCCI, the National Council of Compensation Insurance. They create this public list of class codes that everyone can access. For example, a landscaping company will have employees who fulfill many different types of job roles. They have their secretary and billing department, which would be grouped under the clerical class code, which is 8810. The gardeners who do basic lawn care and leaf blowing would be grouped under the class code 9102. However, if they also do tree removal, they'd have a different class code of 6217.

🔎 Why were class codes created?
For every industry, the NCCI tries to figure out how likely workers in that industry are to get hurt and then assign a numeric value that represents that level of risk. That numeric value is called the rate. So every class code has a corresponding rate that says how risky that business is. This rate is what insurance companies use to determine how much your policy will cost. Riskier jobs have much more expensive policies because their level of risk is higher.

🔎What’s a real-life example of this?
Let's go back to that example we discussed before, the secretary and the billing department. Although their day-to-day tasks look different, in terms of risk of how likely they are to get hurt, they pretty much do the same thing. They sit at their desk and answer phones and type on their computer. So we group them together under the clerical class code. They are very unlikely to get hurt. The typical gardener who's cutting grass and mowing leaves is more likely to get hurt than the secretary. He's handling sharp tools, he's carrying heavy equipment, so his level of risk is higher and the cost for his policy is higher too. Lastly, the gardener who climbs trees and cuts them down is most likely to get her, after all, he's climbing off the ground. Therefore, he has the highest rate of these three people in our example.

🔎 How do you find your class codes?
Workers' comp rates can vary state by state. So in most cases, you can do a quick Google search of the kind of work you perform, and your state and the word class code, and you can find what your class code is, and usually your corresponding rate.

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⏱Timestamps

0:00 What are class codes for workers’ comp?
0:39 What is a class code?
0:56 Where do workers’ comp class codes come from?
1:45 Why does it matter exactly which codes are chosen for your business?
3:19 How to determine a worker's class codes?
3:45 How much does a company pay for workers’ compensation?

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