How California Workers' Comp Premiums Are Calculated: Class Codes, Rates and Your Experience Mod

Your California workers' compensation premium starts with three numbers: the class code that describes the work your employees do, your payroll in each class, and the rate per $100 of payroll your insurer charges for that class. That base is then adjusted by your experience modification (your "ex-mod" or "X-Mod") if you qualify for one, plus any credits, debits and fees in your insurer's filed rating plan.

If you have the right class codes, accurate payroll and a clean claims record, you're paying a fair price for your industry. If any one of those is wrong, you can overpay for years without noticing. This guide explains each piece so you can read your own policy. For the coverage basics (who must carry it, what it pays), start with our California workers' comp guide. For help reviewing your program, see business insurance for California employers.

The basic formula

The WCIRB (the Workers' Compensation Insurance Rating Bureau of California, the state's licensed rating organization) describes the starting point this way: premium begins by multiplying your insurer's rate for each assigned classification by the payroll in that classification. Rates are applied per $100 of payroll, so a rate of $4.90 means $4.90 of premium for every $100 of payroll.

In formula form:

(Payroll in the class ÷ 100) × insurer's rate for the class = manual premium for the class

Add up every class → total manual premium

× experience modification (if you're experience rated)

± schedule credits or debits and other filed adjustments

+ any minimum premium, fees or surcharges the policy carries

= your estimated premium

A worked example (hypothetical figures, for illustration only):

Step	Figure
Estimated annual payroll in your main class	$400,000
Insurer's rate for that class (hypothetical)	$5.00 per $100
Manual premium: 4,000 × $5.00	$20,000
Experience mod	0.90
Modified premium: $20,000 × 0.90	$18,000

Real rates vary by class code and insurer. The premium you pay at the start of the year is also only a deposit based on estimated payroll. The final number is set by the workers' comp premium audit after the policy ends.

Piece 1: Class codes

California uses the Standard Classification System in Part 3 of the California Workers' Compensation Uniform Statistical Reporting Plan—1995 (USRP). It's part of the California Code of Regulations and is approved by the Insurance Commissioner. According to the WCIRB, it contains approximately 700 industry classifications, each grouping businesses with similar operations and similar injury risk.

How a classification gets assigned

For most industries, the WCIRB says classification is done by looking at your overall California operations and picking one classification that describes the business as a whole. A restaurant is classed as a restaurant. The dishwasher and the host are not given separate codes. Most employers end up with only one classification.

Exceptions: standard exceptions (such as clerical office employees and outside salespersons) can get their own lower-rated classes when they meet the USRP's definitions; genuinely separate enterprises may each get a code; and construction is classified by trade, with one employee's payroll divisible between trades if your records support it.

Dual wage classes in construction

Many construction trades have two classification codes for the same work. One is for employees whose regular hourly wage meets a threshold, and the other is for employees below it. The higher-wage code carries a lower rate per $100 because injury cost doesn't rise in step with wages. For policies effective on or after September 1, 2026, the WCIRB lists thresholds such as:

Trade (code pair)	Threshold before 9/1/2026	Threshold from 9/1/2026
Carpentry (5403/5432)	$41	$46
Electrical wiring (5190/5140)	$36	$40
Plumbing (5183(1)/5187(1))	$32	$35
Roofing (5552/5553)	$31	$33
Painting or wallpaper installation (5474(1)/5482(1))	$32	$36

Source: WCIRB September 1, 2026 Regulatory Filing Quick Reference Guide. Thresholds are the regular hourly wage and change every year.

To use the lower-rated high-wage code, the WCIRB says you need original time cards that show the operations performed, total hours each day, and start and stop times for each work period, or a valid collective bargaining agreement with a matching employee roster. Without those records, the payroll goes to the higher-rated code. This is one of the most expensive recordkeeping mistakes a contractor can make. See our contractors insurance page if you're in the trades.

When records decide the code

The same rule applies more widely. Under USRP Part 3, Section V, Rule 3, an employee's payroll can be divided between classifications only if you keep contemporaneous records that show the split by employee and in summary by operation. If you don't, the WCIRB says the entire payroll goes to the highest-rated classification that applies to any part of that employee's work. Percentages and estimates aren't accepted.

Owners and officers

When covered, executive officers, partners, individual employers and LLC members are reported at their actual pay within a minimum and maximum. For policies effective on or after September 1, 2026, those limits are $66,300 minimum and $171,600 maximum per person annually (WCIRB). Some owners can elect out of coverage altogether under Labor Code §§3351–3352. Ask your agent before you sign an exclusion, because excluding yourself also means no benefits for you if you're hurt.

Piece 2: The rate per $100 of payroll

Advisory pure premium rates (the WCIRB's number)

For each classification, the WCIRB calculates an advisory pure premium rate. That is the expected cost of claims plus claims-adjusting expense per $100 of payroll, based on payroll and loss data from all insurers. The WCIRB files these rates with the California Department of Insurance, and the Insurance Commissioner may accept, reject or modify them.

The latest decision, issued July 10, 2026, approved advisory pure premium rates for policies incepting on or after September 1, 2026 that average $1.65 per $100 of payroll. That is a 6.6% increase over the approved September 1, 2025 rates. The WCIRB had proposed an average increase of 10.4%.

That $1.65 is an average across all classes. It is not a rate anyone actually pays. Office classes sit far below it and roofing, tree work and other hazardous classes sit far above it.

Insurer rates (the number you actually pay)

California uses open rating. Under Insurance Code §11735, every insurer files its own rates and supplementary rate information with the Insurance Commissioner before using them. The WCIRB's advisory rates are only a starting point:

	Advisory pure premium rate	Insurer rate
Set by	WCIRB, approved by the Commissioner	Each insurer, filed with CDI
Includes claims and claims-adjusting costs	Yes	Yes
Includes commissions, overhead, taxes, profit	No	Yes
Binding on insurers?	No, advisory only	Yes, once filed

The WCIRB notes that because pure premium rates exclude overhead, insurer rates are typically higher than pure premium rates. An insurer may build its rates on the WCIRB's numbers or use its own actuarial methods. Once filed, it must use them. The WCIRB has no authority over the rate an insurer applies to your policy.

This is why two insurers can quote the same business very differently. Same class code, same payroll, same mod, but different filed rates and different credit plans. The California Department of Insurance publishes a Workers' Compensation Rate Comparison that lists insurer rates by class code.

Not sure your class codes or rate are right? TSM is an independent agency — we compare carriers for you. Call (209) 524-6366 (Modesto) or (530) 221-3031 (Redding).

Piece 3: The experience modification (X-Mod)

What it is

The WCIRB defines it simply:

Experience modification = actual losses ÷ expected losses

Expected losses are what the statistics predict for a business of your size in your classifications, based on your payroll. A mod of 1.00 is average. Below 1.00 (a credit mod) means your claims were better than expected and lowers your premium. Above 1.00 (a debit mod) means worse than expected and raises it. A 0.85 mod cuts the manual premium by 15%. A 1.25 mod raises it by 25%.

Who is eligible

Not every employer gets a mod. The WCIRB totals your payroll by class code across the experience period and multiplies each total by that class's expected loss rate. If the sum meets the eligibility threshold, you're experience rated.

The threshold changes every year. For experience modifications effective on or after September 1, 2026, the WCIRB raised it from $10,800 to $11,700 (Experience Rating Plan, Section III, Rule 1). Note that the threshold is measured in expected losses, not payroll and not premium. The WCIRB's own example shows a business with about $550,000 of three-year payroll in a mid-rated class falling short, while one with about $1.2 million in the same class qualifies.

Which years count

Your rating effective date (normally your policy start date) sets the window. According to the WCIRB, the experience period starts four years and nine months before that date and ends one year and nine months before it. In practice that's roughly three policy years, with the most recent year left out. A claim from last year usually hasn't reached your mod yet. A bad claim stays in it for three years once it does.

How the formula treats claims

Several features of California's formula reward reducing how often claims happen more than reducing how large they get:

• Primary losses carry the weight. Each claim counts only up to a primary threshold that varies with the employer's size. Since 2017, the formula has given full weight to the primary portion and none to the excess.

• The first $250 of every claim is excluded (since the 2019 mods). A first-aid-level claim of $250 or less shows on your worksheet but doesn't affect the mod. The WCIRB designed this so employers have no reason to hold back small claims.

• Frequency is what drives the mod. Because each claim is capped at the primary threshold, five moderate claims typically push a mod up more than one large claim of the same total cost.

Mods are rarely revised after they're issued

The WCIRB won't revise a mod just because a claim's value changes after the mod is issued. Revisions are limited to specific cases, such as a claim officially declared non-compensable, a subrogation recovery, a material ownership change, or a WCIRB reclassification. So reserves need attention before the data is reported. Ask your insurer to review open-claim reserves well before your rating date. Our guide to filing a workers' comp claim covers the reporting habits that keep claims small.

Check your own numbers

The WCIRB's free tools on wcirb.com include X-Mods and More, an Experience Modification Estimator and a request form for your experience rating worksheet. Read the worksheet line by line for payroll in the wrong class, a claim on the wrong policy, or an unaudited year.

Payroll accuracy ties it together

Wrong payroll means wrong premium and, three years later, a wrong mod. Uninsured 1099 workers or subcontractors can be added to your payroll at audit (see 1099 contractors and workers' comp). And the WCIRB says unaudited payroll can't be used in a mod, so skipping an audit typically pushes the mod up. Contractors face stricter rules in 2028. See the SB 216 contractor requirement.

Five things that move your premium (in order of control)

Lever	Who controls it	What to do
Class code assignment	Insurer, WCIRB	Make sure each class describes what your people actually do. Disputes go through the insurer's or WCIRB's process (Ins. Code §§11737(f), 11753.1).
Payroll accuracy	You	Report payroll changes mid-term, and keep time records by operation and start/stop times for dual wage classes.
Claims frequency	You	Safety program, prompt reporting, modified duty. Frequency drives the mod.
Insurer rate and credits	The market	Compare insurers. Filed rates and credit plans differ.
Experience period timing	Calendar	Losses fall off after three years. Plan around your rating date.

More cost ideas are in our article on ways to lower your business insurance premium. For the market forces behind rising premiums, see why business insurance costs more in California. If your rate has drifted above the market, see switching workers' comp carriers.

FAQs

How is workers' comp premium calculated in California?

Payroll in each class code, divided by 100, times the insurer's rate for that class. The total is then multiplied by your experience mod if you have one and adjusted by the insurer's filed credits, debits and fees. The final premium is set by audit after the policy ends.

What is the WCIRB pure premium rate?

It's the WCIRB's advisory estimate of claims and claims-adjusting cost per $100 of payroll for each class. For policies incepting on or after September 1, 2026, approved advisory rates average $1.65 per $100 of payroll. Insurers aren't bound by them, and insurer rates are typically higher because they include overhead and profit.

What is a good experience mod in California?

Below 1.00 means your claims ran better than expected for your size and industry, which lowers your premium. Above 1.00 raises it. A mod is a comparison with businesses like yours, so 1.00 is average, not bad.

How do I qualify for an experience mod?

Your payroll by class over the experience period is multiplied by each class's expected loss rate. For mods effective on or after September 1, 2026, the total must reach at least $11,700 (WCIRB Experience Rating Plan).

Why did two insurers quote different workers' comp prices?

California is an open-rating state (Ins. Code §11735). Each insurer files its own rates and credit plans, so the same payroll, class and mod can produce different premiums.