If you’re a business owner or managing payroll, understanding how your employees are classified for insurance is essential. That’s why many ask, What are workers’ compensation class codes, and why do they matter for my business?
Workers’ compensation class codes are numeric identifiers used to classify jobs by risk level. These codes help insurance companies calculate premiums and ensure employers are properly covered based on the type of work employees perform.
With years of experience helping businesses stay compliant and cost-efficient, I’ve seen how accurate class coding can prevent audits, reduce premiums, and keep operations running smoothly.
In this guide, I’ll explain how class codes are assigned, who regulates them, and how to avoid costly mistakes when classifying your workforce.
About Workers’ Compensation Class Codes
Workers’ compensation class codes are a crucial piece of the puzzle when it comes to calculating your insurance premiums and maintaining compliance as an employer. These numerical codes—assigned based on job duties—help insurance carriers classify risk, calculate costs, and ensure that each business pays its fair share based on the work its employees perform.
At Scher, Bassett & Hames, we regularly help employers in California and beyond understand how these codes impact their policies, correct costly misclassifications, and defend against audits that arise from classification errors. Below, we break down everything you need to know about workers’ comp class codes—including how to find yours, how they’re used, and what to do if you think your employees have been incorrectly classified.
What Are Workers Compensation Class Codes?
Workers compensation class codes are 3- or 4-digit numeric codes used by insurance carriers to categorize different types of work based on the associated risk level. Each code corresponds to a specific occupation or job function. The cost of workers’ compensation varies depending on your business, as different industries and roles carry different levels of risk.
These codes are used to:
- Group similar types of work for risk analysis
- Assign appropriate insurance rates
- Help underwriters calculate premiums
- Ensure regulatory compliance across state lines
For example, a clerical worker might be assigned click on class code 8810 for more information, while a roofing contractor might fall under 5551—a much higher-risk category with significantly higher premium costs.
How Class Codes Affect Workers’ Compensation Premiums
Your class code isn’t just a label—it directly impacts how much you pay for coverage. Insurance premiums are typically calculated using this formula:
Premium = (Payroll ÷ 100) × Rate × Experience Modifier
- Payroll: Your employee wages categorized by job type
- Rate: Based on the class code’s risk level
- Experience Modifier (MOD): An adjustment based on your past claims
If your employees are placed into the wrong class codes—especially higher-risk ones—your premiums can increase significantly. On the flip side, misclassifying high-risk workers as low-risk can result in underpayment that leads to costly penalties after an audit.
Common Workers Comp Class Codes (NCCI)
Below is a table showcasing some common workers’ compensation class codes along with their associated job types and risk levels. These examples illustrate the diversity of classifications used by insurance carriers to assess risk and determine premium rates. Understanding where your employees’ roles fit within these codes can help ensure accurate classification and appropriate insurance coverage.
| Class Code | Job Type | Risk Level |
|---|---|---|
| 0042 | Landscape Gardening & Drivers | Moderate |
| 5403 | Carpentry – Not Otherwise Classified | Moderate-High |
| 5403 | Carpentry – Not Otherwise Classified | High |
| 6217 | Excavation Work | High |
| 7380 | Drivers and Delivery Personnel | Moderate |
| 8742 | Salespeople – Outside | Low |
| 8742 | Outside Salespersons | Low |
| 8810 | Clerical Office Employees | Low |
| 8810 | Office/Administrative Staff | Low |
| 8832 | Physicians & Medical Offices | Moderate |
Note: California uses WCIRB codes, which are similar to NCCI codes but managed independently.
Governing Class Codes and Division of Payroll
Most businesses have multiple employees performing different types of work. In these cases, it’s common—and legally necessary—to allocate payroll across multiple class codes.
- The governing class code is the one that covers the majority of your payroll or primary operations.
- Separate codes must be used for distinct roles (e.g., warehouse workers vs. clerical staff), as long as their work duties and time can be clearly separated and documented.
- If records are unclear, auditors may assign all payroll to the highest-risk code.
Key tip: Keep detailed time logs and role definitions. If you can’t support your payroll breakdown, you may face reclassification during an audit.
Compensation Insurance Coverage
Compensation insurance coverage is the foundation of workers compensation insurance, providing essential financial protection for businesses and employees in case of work-related injuries or illnesses. Workers comp class codes determine the cost and scope of this coverage by reflecting the risk level of specific job types, enabling insurers to set fair premiums.
The National Council on Compensation Insurance (NCCI), an independent advisory organization largely funded by insurance companies, develops and maintains the class code system used by most states. This system groups businesses by risk to ensure equitable and effective compensation insurance coverage. By understanding class codes and accessing NCCI resources, businesses can make informed decisions, tailor coverage to their needs, avoid unnecessary costs, and comply with state regulations.
Whether you manage a small or large workforce, knowing how class codes affect compensation insurance is key to protecting your business and employees.
State-Specific Workers Compensation Rates
Workers compensation insurance rates vary by state and depend on the specific type of work performed. Each state maintains its own workers comp class codes, which determine coverage costs for different jobs and industries. This means the same job may have different codes or rates depending on location.
To navigate these differences, the NCCI offers a state map and online tools to search and learn about your state’s class code system. By selecting your state, you can access details on codes, rates, and historical losses, helping underwriters and business owners make informed coverage decisions and ensure compliance.
Many states also provide online resources and search centers to easily find and verify correct class codes and rates. Using these tools ensures your workers compensation insurance accurately reflects employee roles, helping control costs and avoid audit issues.
What Happens If You Use the Wrong Class Code?
Incorrectly classifying your employees can have serious financial and legal consequences:
- Premium overpayments due to being placed in a higher-risk code
- Retroactive premium adjustments following an audit
- Policy disputes or claim denials from insurers
- State penalties for misreporting payroll or code misuse
If you’re unsure whether your current classifications are correct—or you’ve received notice of an upcoming audit—contacting a workers’ compensation attorney is strongly recommended. At Scher, Bassett & Hames, we’ve helped clients avoid thousands of dollars in penalties through proactive class code reviews and audit defense.
Who Determines Class Codes?
Class codes are initially assigned during the underwriting process based on the information you provide to the insurance carrier. They may reference:
- Your NAICS industry code
- Business website or marketing materials
- Job descriptions and employee roles
- Historical claims data for similar businesses
Many Class Codes have more than one description, with an average of 327 classes in use for a given state, making it essential to ensure accurate classification.
In California, class codes are administered by theWorkers’ Compensation Insurance Rating Bureau (WCIRB). Most other states use NCCI, the National Council on Compensation Insurance. Employers can access definitions and lookup tools through these agencies.
Can You Dispute a Class Code?
Yes—and in many cases, you should. If you believe your business or employees have been misclassified, you can:
- Request a reclassification review through your insurance carrier
- Appeal through your state’s rating bureau (such as WCIRB in California)
- Submit documentation such as job descriptions, time logs, and organizational charts to support your claim
- Hire an attorney to assist with classification disputes or audit defense
Correcting a misclassification can result in significant savings and may prevent costly disputes later on.
Where to Look Up or Verify Class Codes
To verify or research your workers’ compensation class codes, use these resources:
- Your insurance policy declarations page
- WCIRB California Classification Search
- NCRB Class Look-Up Tool
- Consultation with your broker or a legal advisor
Click on the links above to access detailed information about workers compensation class codes.
If you’re unsure how to interpret your code, or which applies to your employee roles, legal guidance can help avoid costly errors.
Importance of Class Codes for Businesses
Getting your workers’ compensation class codes right isn’t just about keeping your premiums low—it’s about protecting your company from liability and ensuring legal compliance. Here’s why proper classification matters:
- Accurate Coverage: If an employee is injured and misclassified, the insurer may deny coverage. The correct code ensures all work activities are insured appropriately.
- Cost Control: Higher-risk codes increase premiums. Using the most accurate, lowest-risk code for each role—legitimately—can dramatically reduce insurance costs.
- Compliance: Misclassification can lead to fines, penalties, or even policy cancellation following an audit. Accurate codes help you comply with state and federal compensation regulations.
Why Employers Trust Scher, Bassett & Hames
With decades of experience representing businesses in California workers’ compensation matters, Scher, Bassett & Hames is uniquely equipped to:
- Review class codes and identify misclassification issues
- Represent employers in WCIRB disputes or insurer audits
- Prevent costly back-pay or penalties from classification errors
- Help you document your operations for future audits and renewals
We don’t just help you fix mistakes—we work proactively to help you avoid them entirely.
We offer comprehensive solutions and valuable support to ensure your workers compensation class codes and related needs are fully addressed.
Conclusion on Workers Comp Insurance
In summary, understanding workers comp class codes, compensation insurance coverage, and state-specific rates is essential for managing your workers comp insurance. Independent advisory organizations like the National Council on Compensation Insurance provide valuable data and guidance to help businesses make informed coverage decisions.
The NCCI develops and maintains the class code system, ensuring businesses, employees, and contractors are protected based on actual work risks. With accurate information, you can select appropriate insurance, comply with state regulations, and protect your business from workplace injury costs.
Learning about workers comp class codes and their impact on insurance coverage is key to safeguarding your business and supporting your employees, no matter your industry or location.
Get Help Understanding Your Work Injury Classification
If you’ve been injured on the job and believe your workers’ compensation claim has been denied, delayed, or undervalued due to incorrect job classification, you don’t have to accept it.
At Scher, Bassett & Hames, we help injured workers fight back when insurers or employers misclassify their job roles to avoid full compensation. We’ll review your work duties, claim records, and classification codes to ensure you receive the maximum benefits you’re entitled to under California law.
Schedule a free consultation today to protect your rights and recover the compensation you deserve. Contact Scher, Bassett & Hames at 408-739-5300 for a free consultation. We’ll review your work duties, claim records, and classification codes to ensure you receive the maximum benefits you’re entitled to under California law.
Additional Reading:
- What Should You Know About Workers’ Compensation Claims in California
- What Benefits Can You Get From Workers’ Compensation in California?
- How Long Does It Take for a Workers Comp Settlement in California?
- How Much Are California Workers’ Compensation Settlements?
Resources:
- NCCI Workers Compensation Class Codes
- California WCIRB Classification Resources
- U.S. Department of Labor – Workers’ Compensation Overview
Frequently Asked Questions
What is the purpose of a workers’ comp class code?
Can my business have more than one class code?
How often do class codes change?
Can I challenge a code assigned by my insurer?
How do I find my workers' comp class code?
Check your insurance policy declarations page.
Contact your insurance carrier or broker.
Use online lookup tools from the National Council on Compensation Insurance (NCCI) or your state's rating bureau.
These resources let you search by job title or industry to identify the correct code for your employees.
