Short answer: your workers’ comp premium is built from three things — your payroll, the risk “class code” of the work your employees do, and your experience modification factor (your claims history compared to similar businesses). Understand those three levers and you can actively lower your cost, not just pay whatever the bill says.
The 3 ingredients of your premium
- Payroll. Premium is calculated per $100 of payroll, so more payroll means more premium (this is why an accurate payroll estimate matters).
- Class codes. Each type of work has a risk classification — roofing costs far more than clerical. Employees doing lower-risk work should be classified correctly.
- Experience modifier (ex-mod). This factor rewards a good claims history and penalizes a bad one. A mod below 1.0 lowers your premium; above 1.0 raises it.
5 ways to lower your workers’ comp cost
- 1. Classify employees correctly. Misclassification — especially lumping low-risk staff into a high-risk code — can quietly overcharge you. Review your class codes.
- 2. Improve safety and reduce claims. Fewer and smaller claims improve your ex-mod over time, which directly lowers premium.
- 3. Manage claims well. Fast reporting and return-to-work programs keep claims from ballooning.
- 4. Keep accurate payroll records. Clean records at audit prevent surprise charges — and make sure you’re not paying on payroll you don’t actually have.
- 5. Shop it with an independent agency. Different carriers price the same business differently. Comparing carriers is one of the fastest ways to save.
Don’t forget the audit
Workers’ comp premiums are usually estimated up front and then audited at the end of the policy period against your actual payroll. If your estimate was off, you’ll owe more (or get money back). Keeping tidy records and correct classifications all year makes audit season painless.
Frequently asked questions
How is workers’ comp premium calculated?
Mainly by your payroll, your employees’ class codes (risk level), and your experience modifier (claims history). It’s priced per $100 of payroll.
What is an experience modifier (ex-mod)?
A factor comparing your claims history to similar businesses. Below 1.0 lowers your premium; above 1.0 raises it.
Can I really lower my workers’ comp cost?
Yes – correct class codes, better safety and claims management, accurate payroll, and shopping carriers can all reduce it.
Do I need workers’ comp if I have no employees?
In Utah, if you have no employees you generally need a workers’ comp waiver instead. It’s required once you have employees.
Pay for the coverage, not the guesswork
Think your workers’ comp is too high? Let’s review your class codes, ex-mod, and carriers. Call (801) 676-7101 or request a review — we’ll make sure your coverage is priced right.
Wasatch Preferred — 9133 S Monroe Plaza Way, Suite B, Sandy, UT 84070 — (801) 676-7101
This article is for general educational purposes only and is not insurance or legal advice. Premium calculations and requirements vary and can change — confirm details with the Utah Labor Commission and a licensed insurance professional.
Official source: Utah Labor Commission (workers’ compensation).