The Confusing Part
Small contractors see large premium swings even when headcount feels stable.
Payroll reporting and class codes are usually the hidden driver.
How It Works
Workers’ comp premium starts with payroll by class code times the rate.
If payroll is misclassified or codes drift, audits correct it later and apply back premium.
Where It Breaks Down
Trying to game class codes stops working when audits catch the mismatch.
The Tradeoffs
- Lower reported payroll now, higher back premium later.
- Accurate codes, steadier pricing and fewer audit surprises.
What Moves the Outcome
Risk Signals
- Claim frequency and loss control practices
- Jobsite mix that changes class code exposure
Coverage Structure
- Payroll reporting accuracy
- Class code assignments
Market Context
- Audit posture by carrier
- Appetite for small construction classes
Deeper context
For the longer explanation, see Payroll Volatility: How It Moves Workers Comp More Than You Expect and Workers Comp Audits: How Class Codes Back-Bill You.
How to Decide
If payroll or codes drift, fix them before renewal. If stable, review loss controls.
Minnesota note: claim patterns and contractor timelines vary by county, so Twin Cities experience isn’t always a perfect proxy for outstate Minnesota.