Glossary  /  Premium mechanics

Rate per $100 of payroll

Also called manual rate, class code rate

Workers' compensation rates are expressed per $100 of payroll, so a rate of 7.50 means $7.50 of premium for every $100 paid to employees in that classification.

The rate looks like a percentage but is not written as one, which is where the mistakes come from. $7.50 per $100 does work out to 7.5% of payroll, but the arithmetic runs the other way round: divide payroll by 100 first, then multiply by the rate. Reading the figure as a straight percentage of payroll, or as a flat charge, lands answers a factor of a hundred off in either direction.

Rates vary enormously by classification and by state. Clerical work can rate under a dollar; high-hazard trades can run into the tens of dollars per $100 of payroll.

Why it matters at audit

The rate is why classification matters so much. Moving payroll between two class codes changes premium by the difference between their rates, multiplied across every dollar.

Related terms

  • Class codeA class code is a four-digit number that groups businesses or job duties by the hazard of the work, and determines the rate applied to payroll assigned to it.
  • Experience modifierAn experience modifier is a factor applied to workers' compensation premium that compares a business's own claim history to the average for its classification, raising or lowering premium accordingly.
  • Loss costA loss cost is the portion of a workers' compensation rate that reflects expected claim payments for a classification, before a carrier adds its own expenses and profit.

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