Two contractors can have the same payroll, the same class codes, and the same carrier — and pay very different workers' comp premiums. The difference is usually the experience modification factor, known as the "mod" or EMR. It's the number that rewards businesses with good loss history and penalizes those without, and for contractors it does something even bigger than adjust premium: it can decide whether you're allowed to bid at all.
What is an experience modification factor?
It's a multiplier on your workers' comp premium that reflects your own claims history versus businesses like you. The baseline is 1.00 — dead average for your classification. From there:
- Below 1.00 is a credit — your losses have been better than average, so you pay *less* than the baseline premium.
- Above 1.00 is a debit — worse-than-average losses, so you pay *more*.
A 0.85 mod means you pay 85% of the baseline; a 1.20 mod means 120%. Applied to your premium year after year, that swing is substantial — which is why the mod is one of the most important numbers in your insurance program.
How is the mod calculated?
At a high level, the rating bureau (NCCI in most states, or an independent state bureau) compares your actual losses to the expected losses for a business of your class and size, over a three-year window — and importantly, it uses the three years *ending about one year back*, not your most recent year. So last year's claims don't hit your mod immediately; they roll in later and linger.
Two features of the formula matter in practice:
- Frequency is weighted more heavily than severity. The calculation splits each claim into a "primary" portion (which fully counts) and an "excess" portion (which is discounted). The result: several small claims hurt your mod more than one large claim of the same total dollars. How *often* you have claims matters more than how big they get.
- Payroll and class codes drive the "expected" number. If your payroll or classifications are wrong (see misclassification), your expected losses — and therefore your mod — can be wrong too.
What counts as a good mod?
1.00 is average; lower is better. A mod of 0.90 or 0.80 signals a safer-than-average operation and earns a real premium credit. A mod above 1.00 signals the opposite and adds a surcharge. For most businesses that just affects cost — but for contractors it's a gatekeeper.
Why your mod matters beyond premium
For contractors, the mod is a safety scorecard that general contractors and project owners read before they let you on site. Many GCs set a hard rule: no subcontractor with a mod above 1.00 can bid. A high mod can disqualify you from work entirely, regardless of price. So a low mod isn't just a discount — it's access to projects. It also signals to carriers that you're a well-run risk, which helps at renewal and in a tight market. (See general contractor insurance and business insurance for contractors.)
How do I lower my experience mod?
Because the mod runs on a three-year window, improvement is a campaign, not a quick fix — but it's very doable:
1. Attack claim frequency first. Since the formula punishes frequency over severity, preventing the small, frequent claims moves the mod the most. A documented safety and training program is the foundation. 2. Use return-to-work / light duty. Getting an injured employee back on modified duty shortens the claim and reduces the loss dollars that feed the mod. 3. Report claims promptly and manage them. Fast reporting and active claims management (with your carrier's adjuster) keep claims from developing into larger, mod-inflating losses. 4. Audit your mod worksheet. Mods are calculated from data that can be wrong — incorrect payroll, misclassified employees, or claims that should have been closed. Reviewing the worksheet can catch errors that are inflating your number. This ties directly to getting your audit and classifications right. 5. Keep classifications and payroll accurate, since they set the "expected losses" your actual losses are measured against.
For the broader cost picture, see how much does workers' compensation insurance cost and how to lower your commercial insurance costs.
Our approach
At Cory Washington & Co., we treat the mod as something to manage all year, not discover at renewal. We review your mod worksheet for errors, help you build the safety and return-to-work practices that bring frequency down, and coordinate claims handling so open files don't balloon — because for our contractor clients especially, a mod under 1.00 is the difference between bidding and sitting out. See our workers' compensation insurance overview for the full picture.
Want to understand or lower your experience mod? Request a quote or a policy review and we'll walk through your worksheet with you.
Frequently Asked
What is an experience modification factor (EMR)?
It's a multiplier applied to your workers' comp premium that reflects your own claims history compared to other businesses of your type and size. A mod of 1.00 is average. Below 1.00 is a credit — you pay less than the baseline for your class. Above 1.00 is a debit — you pay more. So two identical businesses with the same payroll can pay very different premiums based entirely on their loss history.
What is a good experience mod?
1.00 is the industry average for your classification. Anything below 1.00 means you've had better-than-average losses and earn a credit; the lower, the better. Above 1.00 means worse-than-average losses and a surcharge. Many general contractors won't let a subcontractor bid with a mod above 1.00, so for contractors a sub-1.00 mod isn't just cheaper — it's often required to win work.
How do I lower my experience modification factor?
Reduce claim frequency first — the mod formula penalizes the number of claims more heavily than the size of any single claim, so several small claims can hurt more than one large one. Then: run a documented safety program, use a return-to-work/light-duty program to shorten claims, report claims promptly, manage open claims actively with your carrier, and audit your mod worksheet for errors in payroll or classification. Improvements show up over the three-year rating window, not overnight.
This article is general information for business owners, not insurance or legal advice, and does not bind or alter coverage. Policy terms, eligibility, and pricing vary by carrier and state — confirm specifics with our licensed team before making decisions.