How to calculate a construction company EMR
Your EMR compares the workers' comp losses your company actually had to the losses expected for a company of your size and trades. Small claims count in full up to a split point, big claims count only partly, and the result is a multiplier on your premium.
A construction company's experience modification rate (EMR, or mod) is calculated by the rating bureau, not the contractor, using this basic formula from the NCCI experience rating plan: mod = (Ap + W x Ae + (1 minus W) x Ee + B) divided by (E + B). Ap and Ae are your actual primary and excess losses over the experience period, Ep and Ee are the expected primary and excess losses for your payroll and job classes, E is total expected loss, W is a weight, and B is a ballast value. A mod of 1.00 is average. Below 1.00 lowers your workers' compensation premium and helps at prequalification. Above 1.00 does the opposite.
You cannot set your own mod, but you can check it. Knowing how each piece works lets you catch payroll and claim errors on the worksheet and see why one claim pattern hurts more than another.
The pieces of the EMR formula
| Symbol | What it means | Where it comes from |
|---|---|---|
| Ap | Actual primary losses: the part of each claim below the split point | Your claims during the experience period |
| Ae | Actual excess losses: the part of each claim above the split point | Your claims during the experience period |
| E | Total expected losses | Your payroll by class code times the expected loss rate for each class |
| Ep and Ee | Expected primary and expected excess losses | E split using the D-ratio, the share of losses expected to be primary |
| W | Weight given to your excess losses | Set by the bureau and shown on your worksheet; it reflects how much your own experience is trusted |
| B | Ballast, a stabilizing value | Set by the bureau and shown on your worksheet; it dampens how far a single claim moves the mod |
The split point, and why small claims hurt
Every claim is cut in two at the split point. The primary part counts in full. The excess part counts only at weight W. NCCI raised the split point from $5,000 to $10,000 in 2013 and kept raising it, and it has since been adjusted for claim inflation. A Johnson Financial Group summary lists $17,000 for 2019. As that summary shows, a higher split point means more of each ordinary claim counts in full, so claim frequency (many small claims) moves the mod more than one larger claim of the same total.
Medical-only claims get a discount
Under NCCI's Experience Rating Adjustment, 70 percent of medical-only losses are excluded from the calculation, so only 30 percent counts. The stated purpose is to remove the incentive for employers to skip reporting small medical-only claims. Report them. Paying a small claim out of pocket to protect the mod can create bigger problems with your carrier and the state.
How to calculate your EMR step by step
- Get the worksheet. Ask your agent for the current experience rating worksheet. It lists the policy periods used, payroll by class code, expected loss rates, D-ratios, W, B, and each claim.
- Check the payroll. Compare the payroll by class to your audited payroll for each policy year. A clerical error that moves carpenters into a higher-rated class changes expected losses.
- Check each claim. Match every claim to your own records. Look for closed claims still carrying open reserves, claims that belong to another employer, and medical-only claims coded as lost time.
- Split each claim. Primary portion is the claim up to the split point; excess is the rest. Apply the 30 percent factor to medical-only claims.
- Add up Ap and Ae. Total the primary and excess portions.
- Plug into the formula. Use the bureau's E, Ep, Ee, W, and B from the worksheet. Do not guess these values; they change by state, class, and year.
- Compare to the published mod. If your math is far off, find out why before the policy renews.
Worked example: one large claim vs four smaller ones
The numbers below are made up to show the mechanics. Your bureau's W, B, D-ratio, and split point will be different. Say a framing contractor's worksheet shows total expected losses (E) of $100,000, a D-ratio of 0.30 (so Ep is $30,000 and Ee is $70,000), W of 0.20, B of $30,000, and a split point of $17,000.
Scenario A: one $60,000 lost-time claim plus three $2,000 medical-only claims. The big claim adds $17,000 primary and $43,000 excess. The medical-only claims count at 30 percent, or $600 each, adding $1,800 primary. So Ap is $18,800 and Ae is $43,000.
| Line | Scenario A: one $60,000 claim | Scenario B: four $15,000 claims |
|---|---|---|
| Ap (primary actual) | $18,800 | $61,800 |
| W x Ae (0.20 x excess actual) | $8,600 | $0 |
| (1 minus W) x Ee (0.80 x $70,000) | $56,000 | $56,000 |
| B (ballast) | $30,000 | $30,000 |
| Numerator | $113,400 | $147,800 |
| E + B | $130,000 | $130,000 |
| EMR | 0.87 | 1.14 |
Scenario B has the same $60,000 of lost-time losses spread over four $15,000 claims. Each sits fully below the split point, so all of it counts as primary. The mod jumps from about 0.87 to about 1.14. That is the frequency effect in plain numbers, and it is why safety programs that cut the number of injuries pay off faster than people expect.
What the EMR does to premium and bids
The mod multiplies the manual premium. On a policy with $150,000 of manual premium, a 0.87 mod brings it to about $130,500, and a 1.14 mod pushes it to about $171,000 (example figures). That gap flows straight into your labor burden and your bid prices. Many owners and general contractors also ask for your EMR on prequalification forms, and a mod above their cutoff can keep you off the bid list entirely. See how to get on general contractor bid lists.
Mistakes when reading or calculating an EMR
- Comparing your mod to a competitor's from a different state or rating bureau. Values are calculated with different inputs.
- Assuming last year's injuries show up right away. The mod uses an experience period of prior policy years set by the bureau, so a claim affects several future mods.
- Ignoring open reserves. An open claim's reserve counts as a loss until it closes, so push the carrier to close or adjust stale claims before the valuation date.
- Not reconciling payroll classes. Expected losses depend on them, and errors can raise or lower your mod.
- Treating the worksheet as final. Bureaus accept corrections when the data is wrong, but only if you catch it.
Related guides, terms, and tools
To bring a high mod down, read how to lower your experience modification rate. For the insurance basics, see workers' compensation for contractors explained, and for the injury records that feed the claims, how to keep an OSHA 300 log.
Smart Business Automator keeps payroll classes, incident records, and subcontractor insurance and EMR documents in one place, which makes the annual worksheet review and GC prequalification forms faster. See subcontractor compliance automation.
Frequently asked questions
What is a good EMR for a construction company?
A mod of 1.00 is average for your size and trades. Below 1.00 is better than average and lowers premium. Many owners and GCs set a maximum EMR on their prequalification forms, so check the cutoff for the work you want.
Who calculates my EMR?
The rating bureau for your state calculates it, using payroll and claims reported by your insurance carriers. That is NCCI in the states where it rates, or an independent bureau in states that run their own. Your agent can get you the worksheet and tell you which bureau applies.
Why did one small injury raise my mod so much?
Claims below the split point count in full as primary losses, and primary losses carry the most weight. Several small claims usually raise a mod more than one larger claim of the same total.
Do medical-only claims count toward the EMR?
Partly. Under NCCI's Experience Rating Adjustment, 70 percent of medical-only losses are excluded, so only 30 percent counts. They still matter, which is why reporting and managing them well helps.
Can I calculate my own EMR exactly?
You can reproduce it if you have the worksheet values for expected losses, D-ratio, weight, ballast, and split point. Without those bureau values, any calculation is only an estimate.
