For small businesses, workers’ comp class codes influence the premiums you pay, shape audits, and can even trigger HR compliance concerns. Each code is tied to job risk. The higher the risk, the higher the rate.
What you’ll learn
What you’ll learn
Key takeaways
- Workers’ comp class codes group employees by job risk to determine your premium
- You can find the codes on your certificate of insurance
- Higher-risk work results in higher rates, and splitting payroll by role can control costs
- Misclassification can trigger audits, back premiums, or penalties
- Ongoing reviews of job duties and payroll help you stay compliant
Most small businesses carry multiple codes to reflect different job types. A clerical employee might cost a fraction of what a field worker does. That’s why understanding how these codes work and how to manage them makes a difference with both cost control and compliance.
Who sets the codes and how assignments work
In the majority of states, the National Council on Compensation Insurance (NCCI) maintains the system that assigns workers’ comp class codes. These numeric codes reflect job risk and help insurers accurately price coverage. That classification process starts when a business describes its employee duties to the insurer, which then assigns codes based on risk.
From there, the insurer or state bureau assigns the appropriate codes. These assignments are verified when the policy is issued and again during audits. Experience modifiers also impact your premium. They are calculated separately from your class codes and reflect your claims history.
Keep in mind that workers’ comp class codes can vary by state. Some states, like California and New York, maintain their own systems rather than using the NCCI, so the code you’re assigned could depend on your business’s location. Once you know which system your state uses, the next step is understanding how those codes show up on your policy and how each one affects what you pay.
Let’s review some of the different codes and the impact they make.
Real-world examples you’ll see on policies (and why they matter)
Understanding how NCCI class codes are assigned sets the stage for why they matter.
Here are some examples of classes and what their duties entail:
- 8810 – Clerical office employees: Low-risk, low-cost. Typically used for admin roles with no physical labor or field exposure
- 8742 – Outside salespersons: Slightly higher risk due to travel but still considered low-hazard
- 5437 – Finish carpentry: Involves tool use and jobsite hazards, and heavy lifting, making it a higher-premium code
- 5190 – Electrical wiring within buildings: Higher physical risk due to ladders, tools, and live voltage
- 5213 – Concrete work: One of the highest-risk classes
Comparing the 2025 rates in New York, insuring concrete workers costs $19.40 per $100 of payroll, versus just $0.10 for clerical roles.
These examples show how even small shifts in job duties can lead to significant changes in actual costs. Class codes should also reflect how you classify exempt and non-exempt employees, especially when duties vary within roles. Assigning the right code helps you avoid unnecessary costs and stay aligned with how your team works.
Moving on, it’s time to see what this means when it comes to the impact on costs.
Misclassification pitfalls and the cost of getting it wrong
Getting class codes right for workers’ comp helps you to stay on budget and in compliance. But when those codes are wrong, the costs can quickly add up. Misclassifying employees can lead to audits, penalties, and back premiums.
Some of the more common mishaps to keep an eye out for include:
- Assigning incorrect codes to temporary employees and contractors, such as seasonal or project-based roles
- Assigning clerical codes to employees who occasionally do field work
- Using outdated job descriptions that no longer match duties
- Ignoring state-specific rules or failing to separate duties across codes
Audit data supports this. In a 2023 NCCI report, over 60% of businesses using Code 8292 (Storage Warehouse NOC) were reclassified, often because they were actually retail or wholesale operations. Similarly, Code 5437 (Finish Carpentry), a code for skilled detail work, was changed in 25% of audits, usually to a general construction code.
We should also point out that penalties vary by state. California assesses $5,000 to $25,000 per willful misclassification. In New York, you could face paying $2,000 for every 10-day period of noncompliance. For businesses with five or more unreported employees, that failure could be treated as a felony. The takeaway? It makes good business sense to get this right.
Make class codes part of payroll ops for painless audits
Avoiding mistakes is just the starting point. Keeping workers’ comp class codes accurate takes ongoing attention and practical habits built into your payroll workflow.
- Start by tagging pay entries by class code at the employee, job, or shift level, depending on which makes the most operational sense. This step guarantees that payroll lines up with actual job duties, making it easier to split roles or assign blended responsibilities when allowed
- From there, run code-level reports that break down gross wages and hours by department, location, or time period. These reports support internal reviews and double as documentation during policy audits or renewals
- Conduct quarterly audits comparing each employee’s duties against their assigned codes. Roles evolve, especially in small businesses where flexibility is common. If someone moves from the warehouse into a supervisory role or splits time between the field and office, update their code and job description as soon as possible
When it’s time for an insurance review, you’ll want to be ready. Store everything in a central location, including current job descriptions, department schedules, prior audit summaries, and any correspondence from your insurer. That way, you’re not scrambling for documents under a deadline.
Easy payroll and compliance
“OnPay makes it easy to manage employees — from payroll to hiring. They even offer pay-as-you-go workers’ compensation that bills weekly based on actual wages, so you only pay for what you use. It’s saved me so much time not having to figure out required insurances like workers’ comp on my own.”
— Jeremy Isham Jeeps Unlimited USA LLC
The more closely your payroll system mirrors the reality of how your team works, you will likely face fewer surprises. With the right setup, keeping class codes clean becomes a habit instead of a hassle. To make that level of accuracy sustainable, many businesses rely on payroll systems that embed class code tracking into every part of the workflow.
Workers’ comp codes provide clarity for small businesses
Managing workers’ comp class codes correctly isn’t just a compliance task — it’s a practical way to control costs and stay prepared when insurers come knocking. Because class codes, rates, and job duties often vary by role and location, counting on spreadsheets or manual notes can leave gaps that surface during a renewal or audit.
OnPay makes workers’ comp class code tracking part of your everyday payroll workflow. You can assign insurer-provided codes at the employee level, update them as job duties change, and generate detailed reports by code, department, or worksite — all while keeping documentation aligned with what your carrier requires. Everything stays organized in one place, so audits and renewals feel routine instead of reactive.
Whether you’re setting up coverage for the first time or cleaning up past classifications, we can help you stay accurate, organized, and audit-ready from day one. Get started with OnPay to simplify payroll and workers’ comp tracking — and our team is here to help with your questions!
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.