If you own a business with employees, you've probably noticed a mysterious number on your workers' compensation insurance bill called your Experience Modification Rate, or EMR. Here's what most business owners don't realize: this single number could be costing you thousands of dollars a year—or saving you just as much. Think of your EMR as your business's safety report card, and just like in school, your grade directly affects your outcomes. In this case, your outcomes are the premiums you pay for workers' comp coverage.
The good news? Unlike some insurance factors you can't control, your EMR is something you can actually improve. Let's break down what this number means, how it's calculated, and most importantly, how you can lower it to reduce your insurance costs.
What Is an Experience Modification Rate?
Your Experience Modification Rate is a number that represents how your company's workplace injury history compares to other businesses in your industry. It's calculated by looking at your actual workers' compensation claims versus what would be expected for a company of your size and type. The baseline is 1.0—that's average for your industry. If your EMR is 0.8, you're doing better than average. If it's 1.2, you're doing worse.
But here's where it gets real: your EMR doesn't just measure your safety record—it multiplies your insurance premium. If you have an EMR of 1.2, you're paying 20% more for workers' comp than a similar company with a 1.0 rating. Conversely, if you've maintained excellent safety practices and have an EMR of 0.8, you're paying 20% less than your competitors. For a business paying $50,000 annually in workers' comp premiums, that's a $10,000 swing either direction.
New businesses typically start with an EMR of 1.0 until they have at least three years of claims history. Once you hit that three-year mark, your actual experience kicks in, and your rating can move up or down based on your track record.
How Is Your EMR Calculated?
The calculation itself is complex—it's managed by either the National Council on Compensation Insurance (NCCI) in 39 states or by independent state rating bureaus in the remaining states. But understanding the basics helps you know what you can control.
Your EMR looks at three years of claims data, but not the most recent year. If you're getting your 2025 EMR, it's based on claims from 2021, 2022, and 2023. This lag exists because it takes time for claims to develop and be properly evaluated. The formula compares your actual losses during this period to the expected losses for similar businesses in your industry and state.
Here's something critical that surprises many business owners: frequency matters more than severity. The calculation splits each claim into two parts—primary losses (the first $17,500) and excess losses (anything over $17,500). Primary losses are weighted more heavily because they measure how often accidents happen at your workplace. The reasoning? Multiple small claims indicate systemic safety problems, while one large claim might just be bad luck. A business with five $5,000 claims will typically see a worse EMR impact than one with a single $25,000 claim.
The calculation also considers your payroll and employee classification codes. Different jobs carry different risk levels—a roofer faces different hazards than an office administrator. The system accounts for these differences when determining what's expected for your business.
The Real Dollar Impact on Your Premiums
Let's make this concrete with an example. Imagine you run a small construction company with an annual workers' comp premium of $60,000 at a 1.0 EMR. If your safety record deteriorates and your EMR rises to 1.25, you're now paying $75,000—that's an extra $15,000 per year. Over five years, poor safety practices could cost you $75,000 in additional premiums alone, not counting the actual costs of the injuries themselves.
Flip the scenario: if you implement strong safety measures and drop your EMR from 1.0 to 0.75, you're now paying $45,000 instead of $60,000. That's $15,000 back in your pocket annually—money you can invest in better equipment, employee bonuses, or business growth.
Beyond the direct premium impact, your EMR affects your competitiveness. Many general contractors and project owners require subcontractors to maintain an EMR below a certain threshold—often 1.0 or lower—to qualify for jobs. A high EMR can literally disqualify you from bidding on lucrative contracts.
How to Improve Your EMR and Lower Your Premiums
The path to a better EMR is straightforward but requires commitment: reduce workplace injuries. Here are the most effective strategies that actually work.
Build a genuine safety culture from the top down. This isn't about posting signs and calling it a day. It means leadership actively prioritizing safety, never pressuring employees to cut corners, and making it clear that no deadline is worth an injury. When workers see management walking the talk on safety, they follow suit.
Invest in comprehensive, ongoing safety training. Research shows that 35% of workplace injuries happen during an employee's first year on the job. New hire orientation is crucial, but don't stop there. Regular toolbox talks, refresher courses, and specific training for high-risk tasks keep safety top of mind. Make training engaging and relevant—workers need to understand not just the rules, but why they matter.
Conduct regular safety inspections and audits. Walk your workplace with fresh eyes looking for hazards before they cause injuries. Create checklists, assign responsibility, and fix problems immediately. An hour spent identifying and correcting a hazard is infinitely cheaper than dealing with an injury claim.
Learn from every incident, no matter how minor. When something goes wrong, resist the urge to simply discipline the employee and move on. Instead, dig into the root cause. Was it inadequate training? A workflow issue? Faulty equipment? Fixing the underlying problem prevents the next injury. Keep detailed records of incidents and your corrective actions—this documentation proves your commitment to improvement.
Consider implementing a return-to-work program for injured employees. Getting workers back to modified duty when medically appropriate keeps claim costs down and shows insurers you're proactive about managing injuries. These programs also help employee morale—people want to feel productive and valued even when recovering.
Focus on employee retention. High turnover means constantly training inexperienced workers, which statistically leads to more injuries. Creating a stable, experienced workforce naturally improves safety outcomes and, consequently, your EMR.
Taking Control of Your EMR
Your Experience Modification Rate isn't just an insurance calculation—it's a reflection of your workplace culture and a powerful financial lever for your business. Every workplace injury carries obvious costs in human suffering and immediate expenses, but the EMR multiplies those costs over years of higher premiums.
Start by requesting your current EMR from your insurance agent or carrier. If it's above 1.0, you have immediate opportunity for savings. Ask for your experience modification worksheet, which breaks down how your rating was calculated. Review it with your agent to understand which claims are impacting you most.
Then commit to a safety improvement plan. You don't need a massive budget—you need consistent attention and genuine commitment. Small businesses that prioritize safety can achieve EMRs well below 1.0, giving them both cost advantages and competitive edges in their markets. The investment in safety pays dividends in reduced premiums, fewer lost workdays, better employee morale, and ultimately, a more successful business.
