Explaining Manufacturing Workers’ Compensation Costs

Workers’ Compensation costs are one of the biggest expenses each month for business owners. Further, industries that face particularly high levels of risk with large payrolls tend to pay more for their premiums, such as manufacturers and importers. Therefore, we have explained in detail how these costs are calculated and how to prepare and reduce the costs of your Hobbs NM Workers’ Comp Insurance.

First, business owners should implement a job safety program, review claim activity, improve loss control, and establish an effective return-to-work program as a means to reduce their costs. This way, you can see what areas need improvement. Then, consider the following:

Job Classifications

Each state assigns codes to the industry and the job title within that sector. Then, these classification codes are broken down further into business within the industry and job duties for each positon. These codes help to identify the premium costs for that industry which reflect the risks that unique business and job duty faces. Therefore, these job duties must be written out explicitly and provide plenty of detail about what the person in that position is responsible for. Consult with your trusted insurance agent for more information on clarifying your job duties to save money.

Experience Modification Factor

An experience modification factor adjusts an employer’s premium to reflect the difference between the employer’s loss experience and the average experience that is expected for its classification(s) and size, says Workers’ Compensation Board. This is unique to your business and will help to gauge its “health” in terms of claim activity.


For each $100 of your payroll, a premium rate is typically assigned based on classification specifics. In turn, businesses are given an Estimated Annual Premium (EAP) which can defer from the actual payroll at the end of the year. At the end of the year, your business will be audited to determine whether you get a credit or owe more money toward your policy.


About Daniels Insurance, Inc.

At Daniels Insurance, Inc., we have a unique understanding of the risk exposures that the small businesses face. With the backing of our comprehensive coverages and our dedication to customer service and quick claims resolution, your business will be fully protected. For more information, contact us today at (855) 565-7616.