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$500k payroll at $5.50/$100 with a 1.25 mod = $34,375/yr. The class code drives more than the payroll — and a sub without a COI lands on YOUR payroll at audit.
Workers comp premiums are arithmetic most owners never see itemized: payroll per $100 × class rate × experience mod. On $500,000 of payroll at a $5.50 trade rate that is $27,500 — and a 1.25 experience mod pushes it to $34,375, a $6,875 surcharge for a bad claims year that follows you for three. Class rates span $0.40 clerical to $15+ roofing per $100, so the CODE assignment moves the premium more than the payroll does. The traps live at audit: misclassified codes get back-billed, and subcontractors without certificates of insurance get added to YOUR payroll. This calculator builds the estimate and prices the mod.
Trade contractors use it before renewal: $500k payroll at $5.50/$100 with a 1.25 mod is $34,375/yr — the class code drives more than the payroll, and a sub without a COI lands on your payroll at audit.
The experience modification rate (EMR, e-mod, or just "the mod") is your claims history as a premium multiplier: 1.00 means your losses match the average for your class codes, 0.85 means you run safer than average (15% discount), 1.25 means a claims problem (25% surcharge). It is computed by the rating bureau (NCCI in most states, independent bureaus in CA, and the monopolistic states separately) from three years of loss data, excluding the most recent policy year — so this year's claim hits your premium next year and stays for three. Finding yours: it prints on your declarations page and your experience rating worksheet — ask your broker for the worksheet, because it shows exactly which claims are driving the number (and worksheet errors are common enough that reviewing it annually is standard practice). Threshold note: mods only apply to employers above a premium eligibility threshold (~$5–10k depending on state) — below it you pay straight class rates with no mod either way. The mod is the whole game for mid-size trade shops: it follows you across carriers (switching insurers does not escape it) and it is the number general contractors ask for on bids — a mod over 1.0 can disqualify you from work, which prices safety beyond the premium.
The audit true-up catches three things, all preventable. Estimated vs actual payroll: premiums are quoted on PROJECTED payroll; the year-end audit re-bills at actual — a growth year means a back-bill, and pay-as-you-go billing (premium computed on actual monthly payroll) eliminates the shock. Subcontractor exposure: any sub without a valid certificate of insurance gets their pay added to YOUR payroll at audit — the classic five-figure surprise — so collect COIs before the first day on site, verify the policy is in force (not just issued), and re-collect at every renewal. Class-code drift: the auditor reassigns codes to what people actually DO — the office manager who visits job sites, the owner who picks up tools — and the re-code back-bills at the higher rate for the whole year. The defense file: payroll records by class code (not lumped), COIs current and filed, clear separation of clerical versus field staff duties, and your own pre-audit estimate from this calculator so the auditor's number gets checked, not accepted. Dispute rights exist — audit findings can be challenged with documentation, and brokers who specialize in your trade earn their commission exactly here.
Four levers in impact order. The mod: every point of EMR is a point of premium — safety programs, return-to-work protocols, and fast claim reporting drag the mod down over the three-year window (the EMR impact calculator prices what one prevented claim saves: the claim plus $18k of surcharge). Class codes: verify every employee is coded to their actual duties — legitimate re-coding (the estimator who never leaves the office is clerical) is free money, and misclassification the other direction is audit bait. Payroll structure: overtime premium pay (the time-and-a-half HALF) is excluded from WC payroll in most states, and severance is excluded too — sloppy payroll reporting overpays. And structure: deductibles (trade a $2,500–25,000 per-claim deductible for a meaningful premium cut if your claims are rare), dividend plans (group programs return premiums to safe shops), pay-as-you-go billing, and — at sufficient size — captive or self-insured arrangements. What does NOT work: under-reporting payroll (the audit catches it and adds penalties), misclassifying field staff as clerical (fraud, and the audit back-bills plus penalties), and dropping coverage (personal liability for injuries, stop-work orders, and fines that dwarf premiums — plus most GCs will not let you on site). The premium is negotiable at the margins and arithmetic at the core — work both.