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How Workers Compensation Classifications Work

18 May 2015

Tracy Roberts

The rate that you have to pay on your worker's compensation insurance is based on how your business is classified, so you will want to make sure that your business is classified properly. About two-thirds of the U.S. states have adopted standards that are based on the National Council on Compensation Insurance (NCCI). Those states that do not use this system have their own classification system, usually very similar to the NCCI. Even for states that have implemented it, there are often exceptions.

About the NCCI

The NCCI analyzes worker's compensation costs throughout the industry, the standard worker's compensation rates and various other related concerns, such as how much proposed regulations would cost. This is done to create a classification system that determines how much employers will pay their worker's compensation insurance providers.

The classification system is designed to take employees who have similar professions and to lump them into the same classification. These are employees that insurance companies anticipate will face a similar type of risk. For example, those employees who work in roofing for one company tend to have the same risks, such as the risk of falling off a roof, as those employees from another roofing company.

How the NCCI Works

The NCCI has a list of business classifications with descriptions of each classification's typical business operations. You must choose an option that is based on the type of business that you operate, but not necessarily based on the typical operations of your business. For example, you may have employees who perform janitorial work for your restaurant, but are primarily cooks and servers, they would be classified as cooks and servers.

Exceptions

One exception is with those employees who are a part of low-risk classifications such as sales or clerical work. Since there is a very low chance that these employees will suffer expensive injuries, they should only receive these classifications if more than half of their work involves these duties. For example, if an automotive technician also performs some clerical duties at the auto body shop, he should still be classified as an automotive technician and not a clerical worker. If you are not sure what your employee should be classified as, you should consult with an attorney who advocates for businesses on worker's compensation issues.

For those who work in sales, they will either be classified as regular or outside sales workers. This is an important distinction because outside sales workers can be subjected to greater risk since outside sales workers have to spend time on the road and could be involved in an automotive accident. Fortunately, worker's compensation business advocates answer coverage questions and can help businesses determine if they are classifying their employees correctly.

There are also tasks your business may be responsible for that are considered general exclusions. These are tasks that have unique risks and are performed by only a small number of employees working for your firm. You may have a difficult time determining what general exclusions might apply to you, so it would be helpful to get assistance from a worker's compensation attorney. To learn more, speak with someone like Hamilton Law Firm, P.C.

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