Use negative numbers for credits (e.g., -5 for 5% credit).
Standard premium size discount offered by insurer.
Manual Premium:$0.00
Modified Premium (after Ex-Mod):$0.00
Standard Premium (after Schedule):$0.00
Estimated Annual Premium:$0.00
Effective Net Rate (per $100):0.00
*Note: This calculation excludes fixed expense constants, terrorism surcharges, and state-specific assessments.
function calculateNetRate() {
// Get input values
var payrollInput = document.getElementById("wcPayroll");
var baseRateInput = document.getElementById("wcBaseRate");
var exModInput = document.getElementById("wcExMod");
var scheduleInput = document.getElementById("wcSchedule");
var discountInput = document.getElementById("wcDiscount");
var resultsDiv = document.getElementById("wcResults");
var payroll = parseFloat(payrollInput.value);
var baseRate = parseFloat(baseRateInput.value);
var exMod = parseFloat(exModInput.value);
var scheduleAdj = parseFloat(scheduleInput.value);
var premDiscount = parseFloat(discountInput.value);
// Validation
if (isNaN(payroll) || isNaN(baseRate) || payroll <= 0 || baseRate <= 0) {
alert("Please enter valid positive numbers for Payroll and Base Rate.");
return;
}
// Defaults if empty
if (isNaN(exMod)) exMod = 1.0;
if (isNaN(scheduleAdj)) scheduleAdj = 0;
if (isNaN(premDiscount)) premDiscount = 0;
// 1. Calculate Manual Premium = (Payroll / 100) * Base Rate
var manualPremium = (payroll / 100) * baseRate;
// 2. Calculate Modified Premium = Manual Premium * Ex-Mod
var modifiedPremium = manualPremium * exMod;
// 3. Calculate Standard Premium = Modified Premium adjusted by Schedule Rating
// Schedule Rating is a percentage input (e.g., -5 means 5% reduction)
var scheduleFactor = 1 + (scheduleAdj / 100);
var standardPremium = modifiedPremium * scheduleFactor;
// 4. Apply Premium Discount
var discountFactor = 1 – (premDiscount / 100);
var estimatedFinalPremium = standardPremium * discountFactor;
// 5. Calculate Net Rate = (Final Premium / Payroll) * 100
var netRate = (estimatedFinalPremium / payroll) * 100;
// Update DOM elements
document.getElementById("resManualPremium").innerHTML = "$" + manualPremium.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resModPremium").innerHTML = "$" + modifiedPremium.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resStdPremium").innerHTML = "$" + standardPremium.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resEstPremium").innerHTML = "$" + estimatedFinalPremium.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resNetRate").innerHTML = "$" + netRate.toFixed(3);
// Show results
resultsDiv.style.display = "block";
}
How to Calculate Net Rate for Workers Compensation
Calculating the Net Rate for workers compensation insurance is a critical process for business owners and financial controllers. While the "Base Rate" is determined by your industry classification codes, the Net Rate represents the actual cost you pay per $100 of payroll after all modifications, credits, and debits are applied. Understanding this figure allows you to accurately budget for labor costs and identify areas for savings.
The Difference Between Base Rate and Net Rate
Many employers make the mistake of budgeting based solely on the Base Rate (also known as the Manual Rate). This rate is set by state rating bureaus (like the NCCI) based on the risk profile of specific job classifications (Class Codes).
However, the Net Rate is the mathematical result of applying your company's specific risk factors to that base rate. It answers the question: "For every $100 I pay in wages, how much do I actually pay in insurance?"
Key Variables in the Net Rate Calculation
To use the calculator above effectively, it helps to understand the inputs that drive your final premium cost:
1. Classification Code (Base Rate)
This is the starting point. High-risk professions (like roofing) have higher base rates than low-risk professions (like clerical work). The calculator applies this rate to every $100 unit of your payroll.
2. Experience Modification Factor (Ex-Mod)
The Ex-Mod is a multiplier based on your company's past claims history compared to the industry average.
1.0: Average industry safety performance. No change to premium.
Below 1.0: Better than average safety. Results in a credit (lower premium).
Above 1.0: Worse than average safety. Results in a debit (higher premium).
3. Schedule Rating (Credits/Debits)
Underwriters have the discretion to apply "Schedule Ratings" based on characteristics not captured in the Ex-Mod. Examples include:
Implementing a formal safety program (Credit).
Management cooperation with the insurance carrier (Credit).
Poor housekeeping or equipment maintenance (Debit).
In the calculator, enter a negative number (e.g., -10) for a credit, and a positive number for a debit.
4. Premium Discounts
Insurance carriers often provide automatic discounts as the size of the total premium increases. This is a volume discount acknowledging that the administrative costs of a policy do not rise linearly with the premium size.
Formula: How the Calculation Works
The logic used in our Net Rate calculator follows the standard insurance rating hierarchy:
Final Premium = Standard Premium − Premium Discounts
Net Rate = (Final Premium / Payroll) × 100
Why the Net Rate Matters
Knowing your Net Rate is essential for bidding on contracts. If you bid on a construction project using only the Base Rate to estimate your labor burden, you might underbid if your Ex-Mod is high. Conversely, if you have a great safety record and significant credits, using the Base Rate might cause you to overbid and lose the contract. Always use your Net Rate for accurate job costing.