5 things contractors get wrong about workers' comp

1. Misclassifying payroll

Workers' comp premium is built on payroll multiplied by a rate tied to each job's class code. Putting a roofer in a lower-rated class, or lumping field and office staff together, can trigger big surprises at audit — or leave you overpaying all year. Keep clean records that separate genuinely clerical payroll from field work, and make sure each trade is coded correctly from the start.

2. Letting uninsured subcontractors roll onto your policy

If a subcontractor can't show their own workers' comp coverage, the auditor will typically treat the money you paid them as your payroll — and charge you premium for it. Collect a valid certificate of insurance from every sub before they start, and keep it on file. This is the single most common source of audit "bill shock" for contractors.

3. Ignoring the experience modification factor

Your experience mod (X-Mod) compares your claims history to similar businesses and directly multiplies your premium. A mod above 1.0 means you're paying a penalty; below 1.0 is a credit. Mods are sometimes calculated with outdated or incorrect data. Review yours each year, correct errors, and treat lowering it — through safety and claims management — as a long-term cost strategy.

4. Handling owners and officers incorrectly

Owners, officers, and certain partners can often be included or excluded from coverage, and the rules vary. Excluding yourself saves premium but leaves you personally exposed to a workplace injury; including yourself adds cost but adds protection. It's a real decision with real trade-offs — not a box to check without thought.

5. Treating the audit as an afterthought

Your premium starts as an estimate and is trued up at year-end by audit. Poor records, unexplained cash payroll, or missing sub certificates almost always work against you. A few habits help: record overtime at straight-time wages where allowed, keep certificates organized, and reconcile payroll before the auditor arrives rather than after.

None of these are exotic — they're the blocking and tackling that separates a clean renewal from a frustrating one. A broker who knows construction can catch most of them before they cost you.