Your experience modification rate, or EMR, is the single most important number affecting your workers compensation premium. It compares your company's actual claims history against the expected losses for businesses of your size and classification. An EMR of 1.0 is average. Below 1.0 means you are safer than average and receive a premium discount. Above 1.0 means your claims exceed expectations and you pay a surcharge. For roofing contractors in class code 5551, where base rates already run $15 to $40 per $100 of payroll, even a small EMR swing produces enormous premium changes.
How NCCI Calculates It
The National Council on Compensation Insurance (NCCI) calculates your EMR annually using three years of claims data, excluding the most recent year. So your 2026 EMR is based on claims from policy years 2022, 2023, and 2024. The formula weighs several factors:
- Expected losses: Based on your class code and payroll, NCCI calculates what a company your size should experience in losses. For a roofing contractor with $800,000 in annual payroll, the expected loss calculation is substantial because roofing is inherently high-risk.
- Actual losses: Your real claims broken into primary losses (the first $5,000 to $18,500 of each claim, depending on your state) and excess losses (amounts above the primary threshold). Primary losses are weighted much more heavily than excess losses.
- Claim frequency vs. severity: The formula penalizes frequency more than severity. Three claims of $10,000 each hurt your EMR more than one claim of $30,000 because frequency indicates systemic safety problems.
The Financial Impact
Consider a roofing contractor with $1 million in annual payroll and a base workers comp rate of $25 per $100 of payroll. At an EMR of 1.0, the premium is $250,000. At 0.80, it drops to $200,000 — a $50,000 annual savings. At 1.30, it jumps to $325,000 — a $75,000 annual penalty. Over the three years that each claim affects your EMR, a single serious fall injury can cost $150,000 to $225,000 in additional premiums alone, on top of the claim costs.
Strategies to Lower Your EMR
Implement a formal safety program. OSHA 29 CFR 1926.501 mandates fall protection at six feet, but best-in-class roofing contractors exceed minimums with daily toolbox talks, 100% tie-off policies, and third-party safety audits. Carriers reward documented safety programs with improved mod factors.
Manage claims aggressively. Report every injury within 24 hours — delayed reporting increases claim costs by an average of 30%. Return injured workers to modified duty as quickly as medically appropriate. Every dollar reduced on an open claim directly improves your future EMR. Work with your carrier's claims adjuster to close files promptly and challenge medical charges that appear excessive.
Control claim frequency. Because the EMR formula penalizes frequency, eliminating small claims has an outsized impact. Consider establishing a medical-only first aid program that handles minor injuries in-house before they become reportable claims. A $500 first-aid expense that prevents a $5,000 recorded claim can save you $15,000 to $25,000 in EMR-driven premium increases.
Verify your EMR worksheet. Request your NCCI experience modification worksheet annually and audit it for errors. Common mistakes include claims that should have been closed still showing as open, claims attributed to your company that belong to a different entity, and incorrect payroll figures. Approximately 10% to 15% of EMR worksheets contain errors, according to industry auditors. Your broker should review this document with you every year.
Use subcontractors strategically. Subcontractors with their own workers comp policies do not affect your EMR — their claims go against their own modification. If you are considering hiring employees versus subbing out high-risk tasks like steep-slope work or hot-applied roofing, weigh the EMR implications.
Your EMR follows you for three years. Investments in safety today pay dividends across 36 months of future premiums.