Back to Basics: Class Codes
Part 1 of a 3-part series on properly using class codes.The most common industry classification system is managed by the National Council on Compensation Insurance (NCCI) and has more than 2,000 class codes housed in the Scopes Manual. A workers' compensation classification code is based on the operations of your business and the corresponding risk associated with the workplace exposure. Each class code has a premium rate associated with it. For example, the classification code for a client who's staffing office clerks should carry a significantly lower rate than the code for a client who supplies roofers.
Why Class Codes Are ImportantAn employer's best self-defense against incurring a large additional premium during an audit is to obtain adequate guidance regarding how to properly classify exposures for workers' compensation coverage. Assigning the correct code gives you a better indication of the type of job you're assigning a temporary employee, the risks associated and the resulting claims that can occur. If you're using the wrong code, you're not getting an accurate representation of losses and have less of a chance of properly managing risk. This can affect your experience modification rating, which in turn, impacts premium.
How to Find a CodeThe easiest way to find a code is to refer to the alphabetical index. Keep in mind, you don't want to be too specific when looking for a code, or you'll never find it. You need to think in broad generic terms. This advice was given out by the NCCI. Finding the general category will help lead you in the right direction. For each code, there will be several things listed:
- Phraseology - general description of the operations
- Cross Reference - other descriptions that apply to the codes
- State Special - lists any exceptions you need to be aware of for specific states
- Scope - what you need to read to make sure you have the best class code for the job you're placing
Dont Get Tricked By WordingYou'll need to be on the lookout for specific words in the phraseology of the code you're reading. It could impact how you classify your temps:
- All employees or all other employees: No other classification can be assigned unless noted in the wording. This applies even if some operations are at a separate location. The standard exceptions dont follow this role such as clerical, drivers, sales etc.
- Includes or &: If this wording appears, those operations are included in the code. For example, Class Code 8868 includes clerical so that would not be separately rated as 8810.
- NOC or not otherwise classified: If there's not a more specific code available, then you would use the NOC of that industry. For example, there are multiple retail store codes specific to the product being sold. If the type of retail store you're looking at does not fit into the specific codes available, you would use the Store NOC code in the Scopes.
- To be separately rated: Operations or employees referenced after this wording in the phraseology must be separately classified.
- F: If you have the letter F attached to a code, it means the code is subject to the federal statutes, and you should check with your policy to ensure you have proper coverage under your workers' compensation policy.
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