Workers' Comp Class Codes: How HR Assigns and Reviews Employee Classifications

10/23/2026

Workers' comp class codes look like an insurance detail that belongs to the agent and the carrier. In practice, HR and payroll control most of the information that decides them: job titles, job duties, where people work, and how their pay is recorded. When that information is wrong or out of date, the policy is priced on the wrong codes, and the error usually surfaces at the premium audit as an unexpected bill.

This guide explains how class codes work, which rating bureau sets them in your state, when the clerical and outside sales codes apply, how to handle employees who do more than one kind of work, and how to correct a misclassification before the auditor finds it. For the full pricing picture, start with our guide to how premiums are calculated.

How Class Codes Drive Premium

A workers' compensation classification code describes a type of business or operation. Each code carries a rate, filed by state, expressed per $100 of payroll. The basic arithmetic for each code on the policy is:

Payroll in the code ÷ 100 × the rate for that code = premium for that code

The policy adds up those amounts, then applies the experience modification factor and other premium adjustments. Because the rate is attached to the code, the code is the single biggest lever in the formula that HR can influence directly. Rates for office work are typically a small fraction of the rates for construction, manufacturing or trucking, because the injury risk is so different.

A hypothetical example shows the scale. Suppose a contractor's office manager earns $60,000. If that payroll is correctly placed in a clerical code with a hypothetical rate of $0.20, the premium for that employee is $120. If it lands in the contractor's construction code at a hypothetical rate of $8.00, the premium is $4,800. The numbers are illustrative, not real rates, but the gap is typical of what misclassification does.

Codes also feed the experience mod. Under NCCI's experience rating plan, the employer's expected losses are calculated class by class from the payroll reported in each code. If payroll is reported in the wrong code, expected losses are wrong too, and so is the mod built on them. Our article on workers' comp cost factors covers the other inputs.

The business is classified, not the employee

The most common misunderstanding is that every employee gets a code that matches their job title. That is not how the system works. In NCCI-based manuals, it is the business of the employer within a state that is classified. The carrier assigns a governing classification that describes the employer's main operation, and most employees fall into it, including many whose own work looks different, such as a warehouse worker at a wholesale distributor. Employees move out of the governing class only when a specific rule allows it, most often one of the standard exception codes covered below.

NCCI and Independent-Bureau States

Who writes the classification rules depends on the state. According to NCCI's state map, there are three groups:

• NCCI states. In most states, the insurance department has designated NCCI (the National Council on Compensation Insurance) as the licensed rating and statistical organization. These states use NCCI's Basic Manual and its classification codes, with state-specific exceptions. Texas is an NCCI state.
• Independent bureau states. Eleven states have their own rating bureau: California, Delaware, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania and Wisconsin. Some of these bureaus closely follow NCCI's code numbers and rules; others, such as California's WCIRB and Pennsylvania's PCRB, publish their own manuals, and code numbers and wording can differ from NCCI's.
• Monopolistic states. North Dakota, Ohio, Washington and Wyoming run state funds that set their own rates and rules, so check each fund's classification system directly.

For a multi-state employer, this means the same job can carry a different code, or a different rule, in different states. Always look up a code in the manual for the state where the employee works, and ask your agent which bureau's rules apply.

Doing an NCCI class code lookup

NCCI's full Basic Manual and Scopes of Basic Manual Classifications are subscription products, so most employers rely on their agent or carrier for the authoritative wording. You can still do a useful first check: compare the code descriptions on your policy declarations page against what your business actually does today. If the description does not match your current operations, or if an operation you added is missing, that is a question for your agent before renewal.

Common Office Codes and When Clerical Classification Applies

NCCI-based manuals recognize a handful of standard exception classifications for occupations that are common to many businesses. Employees in these occupations can be assigned to the standard exception code instead of the governing class, if they meet the conditions. The ones HR sees most:

Code	Description (NCCI wording)	Typical employees
8810	Clerical Office Employees NOC	Office staff, HR, payroll, accounting, administrative assistants
8871	Clerical Telecommuter Employees	Clerical staff who work from home or a shared office away from any employer location
8742	Salespersons or Collectors – Outside	Sales or collection staff who work away from the employer's premises
7380	Drivers, Chauffeurs, Messengers and Their Helpers NOC – Commercial	Drivers, where the governing class does not already include them
8748	Automobile Salespersons	Auto, mobile home and boat sales staff

 

When code 8810 applies

The wc class code 8810 is the one most employers care about, and the rules are stricter than many assume. In the NCCI-based rule:

• The governing class must not already include clerical employees. Some classification wording expressly includes clerical work. If yours does, office staff stay in the governing class.
• The duties must be clerical. Correspondence, records and files, computer and data entry work, telephone work, copying and similar general office duties. Incidental errands such as making bank deposits, picking up mail or buying office supplies do not disqualify the employee.
• The work area must be physically separated from the operation. Work stations must be separated from the operating hazards of the business, such as the shop floor, warehouse, store or yard, by floors, walls, partitions, counters or similar physical barriers.
• The employee must not be exposed to the operating hazards. An employee who supervises non-clerical workers in the operation, does physical labor, demonstrates products or performs work included in the governing class does not qualify.

The last point catches many small employers. The bookkeeper at a landscaping company who also helps load trucks two afternoons a week is not 8810 for that time; in most cases, all of their payroll belongs in the governing class.

Telecommuters: code 8871

Clerical employees who work from home or a shared office away from any employer location are classified in code 8871 in the states that recognize it. NCCI filed rule revisions in 2025 that establish code 8871 in Texas and clarify that it is not assigned when the governing classification includes clerical employees. Texas approved the change for policies effective on or after July 1, 2026. If you have remote staff, ask your agent whether 8871 applies in each state where they work.

When code 8742 applies

Code 8742 is for employees engaged in sales or collection work away from the employer's premises. It does not cover employees who deliver merchandise, and an employee whose work otherwise falls within the employer's operations belongs in the governing class. An employee who splits time between outside sales and clerical office work in the employer's office generally stays in 8742.

Dual-Duty Employees and Payroll Splits

Employees who do two kinds of work are where payroll records matter most. NCCI-based manuals allow an employee's payroll to be divided among classifications only under the interchange of labor rule, and only when:

1. Each classification can properly be assigned to the employer under the manual rules. You cannot create a code for one person's side duties.
2. The employer keeps payroll records showing the actual time each employee worked in each classification, with an hourly wage comparable to wage rates for that work in the employer's industry.

Two details trip employers up:

• Estimates and percentages are not allowed. "She spends about 30% of her time in the shop" will not support a split at audit. Time records by classification will.
• Without proper records, the entire payroll goes to the highest-rated classification that applies to any part of the employee's work.

Holiday, vacation, sick pay, overtime and other pay that is not tied to a specific code is generally allocated to the classification with the greatest amount of payroll for that employee.

Standard exception codes are a different matter. An employee who spends part of their time in the operation is usually disqualified from 8810 altogether rather than split between 8810 and the governing class. Before you set up a split, confirm with your agent that the rule permits it for that employee.

How to set it up in payroll

• Add a workers' comp class code field to your payroll or timekeeping system and require a code on every time entry for dual-duty employees.
• Pay each kind of work at its own documented rate when the wage differs.
• Run a report by employee and by class code each pay period, not just at year end.
• Keep job descriptions that match the codes, and update them when duties change.

Reviewing Codes When Jobs Change

Classifications drift because jobs change faster than policies do. Build a review into the events HR already handles:

• New hires. Confirm the code at onboarding, especially for office roles that might be exposed to operations.
• Promotions and transfers. A clerk who becomes a working supervisor in the warehouse has left 8810.
• New remote employees. Check the state, the telecommuter rules and whether that state is monopolistic or has its own bureau.
• New operations or services. Adding installation, delivery or field service often adds a code.
• Contractor conversions. Workers reclassified from 1099 to W-2 need a code from their first day.
• Compare the payroll estimates by code on the renewal application with your actual payroll report.

A short annual review works well: pull a payroll report by code, list every employee whose payroll sits outside the governing class, and confirm that each one still meets the conditions for their code.

Correcting a Misclassification Before the Audit

If you find an error, correct it before the auditor does. The steps:

3. Document the facts. Write down the employee's actual duties, location, supervision and time records. If the issue is a code on the policy itself, describe the operation in plain language.
4. Contact your agent or carrier. Ask whether the code on the policy should change and request a policy endorsement for the correct classification. Ask how the change will be applied to the current policy period, since that depends on the rules and the reason for the change.
5. Fix your payroll reporting going forward. Reassign the employee or code in your payroll system and start the time records a split requires.
6. Prepare for the audit. Keep the documentation with your audit file so the auditor sees why the payroll is where it is.

If you and the carrier disagree about a classification and your state uses NCCI's rules, NCCI offers a Dispute Resolution Process in most NCCI states. The policyholder first tries to resolve the dispute with the carrier and pays the undisputed premium; NCCI can then assign a dispute consultant, and unresolved disputes can go to a state appeals board or committee. NCCI can also perform a classification inspection of the business. Independent bureaus and monopolistic funds have their own procedures, so check with the bureau or fund for your state.

Class codes are one of the topics covered in our workers' comp training for HR. For a broader look at how claims affect what you pay, see how claims impact workers' comp premiums.

Learn to Manage Classifications and Premium

Getting classification right is part of a larger skill set: understanding how premiums are determined, what employers can do to affect them, and how injury and payroll records support the policy. The Workers' Compensation Training & Certification program covers premiums alongside injury reporting, claims, return to work and recordkeeping, in a self-paced online course with one year of access and an optional exam for the Certified Workers' Compensation Administrator credential. Teams of three or more can enroll together, with a progress view for the manager.

Frequently Asked Questions

What are workers' comp class codes?

Workers' compensation classification codes are numbers that describe a type of business or operation. Each code carries a rate per $100 of payroll, and the payroll you report in each code determines most of your premium. In most states the codes come from NCCI. Eleven states have independent rating bureaus with their own manuals, and the four monopolistic state funds set their own rates and rules. The business, not each employee, is classified, with exceptions for clerical, outside sales and some other common occupations.

What is workers' comp class code 8810?

Code 8810 is Clerical Office Employees NOC in the NCCI system. It applies to employees whose duties are clerical, such as records, correspondence, data entry and telephone work, in a work area physically separated from the operations of the business. It is a standard exception code, so it is available only when the governing classification does not already include clerical employees, and an employee exposed to the operating hazards of the business does not qualify.

What is the difference between code 8810 and 8742?

Code 8810 covers clerical office employees who work in a separated office area. Code 8742 covers outside salespersons and collectors who work away from the employer's premises. An employee who does outside sales and also some office work is generally classified in 8742. Neither code covers employees who deliver goods or do other work that falls within the employer's governing classification.

Can one employee's payroll be split between two class codes?

Sometimes. NCCI-based rules allow a split under the interchange of labor rule only when both codes can properly be assigned to the employer and payroll records show the actual time the employee worked in each one. Estimates and percentages are not accepted. Without those records, all of the employee's payroll goes to the highest-rated code that applies to any part of their work. Standard exception codes such as 8810 generally cannot be split with operational work.

Who decides which class code applies?

The insurance carrier assigns classifications using the manual rules of the rating bureau for the state, based on the information the employer provides. NCCI or the state bureau may inspect the business when there is a question or a dispute. The employer's role is to describe operations and duties accurately, keep payroll records that support the codes, and tell the agent or carrier when operations change.

What happens if my business is misclassified?

If payroll was reported in a code with a lower rate than the correct one, the premium audit will usually move it and bill additional premium. If it was in a higher-rated code than it should be, you may be owed a return. Raise the issue with your agent or carrier as soon as you spot it, document the facts, and use the bureau's dispute process if you cannot agree.

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