Many general contractors won't even look at a bid from a subcontractor whose workers’ comp Experience Modification Rate (EMR)is higher than 1.0.
On public projects and larger private work, the number is often written directly into the prequalification paperwork as a hard ceiling; cross it, and the bid doesn't get read, regardless of price or experience, according to Vertikal RMS, a risk management platform that serves the construction industry, among others.
That's the half of the EMR story that many contractors overlook. It’s not news that a high EMR means a bigger workers' comp bill. But it also can determine which jobs you’re allowed to bid on. And while that workers’ comp rating — or “mod” — tends to be sticky, there are things you can do to manage it over time.
The Experience Modification Rate is a century-old system designed to provide a safety incentive to employers; those with fewer workers’ comp losses pay less, while those with higher losses pay more.
The EMR is a simple multiplier, based on the past three years of claims history and applied to a company’s workers’ comp insurance premium. A rating of 1.0 is the industry average for a company of a given size and classification.
With a rating below 1.0, you pay less than your peers for the same coverage. With a rating above it, you pay more. The gap compounds quickly. Here’s how the math looks on a base premium of $40,000 per year, according to Vertikal RMS:
A business with a 0.65 EMR pays $26,000.
A business with a 1.25 EMR pays $50,000.
A business with at 1.55 EMR pays $62,000.
Construction companies pay roughly $3,050 per employee per year for workers' comp coverage — so a 0.1 EMR increase raises workers’ comp costs by about $300 per covered worker.
The rate is calculated under guidelines from the National Council on Compensation Insurance (NCCI), which uses data from more than 4 million workers’ comp claims per year to set experience-rating standards in 35 states, according to NIP Group, an insurance brokerage.
Most of the markets served by Best Supply — Georgia, Florida, North Carolina, South Carolina, Tennessee and Kentucky — fall under this system. Ohio, Indiana and Michigan operate independently of NCCI; in Ohio, the EMR equivalent is referred to as the Experience Modifier (EM), while Michigan and Indiana refer to it simply as the Mod.
Prequalification ceilings show up across the industry, with public agencies, larger GCs and national developers among the most likely to enforce them, according to Carolina Risk Partners, a workers' comp advisory firm. There's no single rule that applies everywhere; each owner or GC sets its own threshold above which any bids are disqualified from consideration.
That matters most for companies trying to grow — into larger projects, public-sector work or a first relationship with a national general contracting firm.
The EMR formula splits every claim into two pieces. Losses up to $16,500 (as of 2026) count as “primary loss” and get full weight in the calculation. Everything above that counts as “excess loss” and gets only partial weight, per NCCI's own explanation of the split point.
Many claims tend to hit the primary loss threshold, given that the average workers’ comp claim in the construction industry is for somewhere between $40,000 to $70,000 (estimates vary widely depending on the information source).
The upshot is that a company’s primary losses reflect how often claims happen, while the excess losses reflect on their severity. A handful of small claims has more impact on the EMR than a single claim of the same total cost. And because the formula is calibrated to company size, a claim that barely dents a large firm's EMR can spike a smaller contractor's number significantly.
The underlying math lives in the unit statistical report (USR) — a company-specific worksheet that insurers provide to the state workers’ comp systems. Contractors are entitled to review their USR, but relatively few ask to do so.
Audits of USRs routinely identify errors; misclassified codes, incorrect payroll figures and claims logged against the wrong policy year are common examples, notes Gordon Colye, president of risk and insurance consultancy The Coyle Group. Once an error lands in the worksheet, it can affect the mod for years.
If your EMR is high, you can improve it to save money and increase the range of projects for which you’re eligible to bid. The challenge is that the number is a lagging indicator; actions right now take two or three years to have much impact.
Here’s what works:
USR worksheet audit: Reviewing all the data that goes into your EMR is the cheapest and easiest step you can take. Request a copy of your USR from your workers’ comp insurance provider every year to catch misclassification, payroll and other errors before they compound.
Return-to-work programs: Getting injured employees back on modified duty as soon as possible is one of the most effective levers to manage your EMR. It closes claims faster and reduces their cost — which over time reduces the mod. According to the McGriff risk advisory agency, workers on a return-to-work program recovered three times faster, with employers saving up to 70% on claims costs.
First-30-days claims management: Prompt reporting, early insurer contact and documented follow-up all shape how a claim resolves. Faster resolution reduces total cost and, for smaller claims, has outsized impact on the “primary losses” component of the EMR.
Target everyday minor injuries: Reducing the slips and strains also can reduce the primary losses that factor in to the mod.
The EMR is one of the few numbers in this business that affects both what you spend and what you're allowed to earn. Treating it as a fixed cost keeps insurance rates high while limiting work opportunities.
Managing the EMR takes time but can result in both improved profit and more opportunity.
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