How is Your Worker Comp Insurance Premium Calculated Part One Written by Mark Kraemer on 1/8/2018 1:04 AM in Workers Comp Premium Rates, Workers Comp Insurance. It has 1 Comments. Find your worker’s comp premium staggering? The work comp consultants at Minnesota Comp Advisor want you to understand how your rate is calculated. Not only to put an end to your confusion, but because doing so can shed light on opportunities for future premium savings. Calculating Your Work Comp Premium Your annual premium is based on the following formula: RATE X (PAYROLL/100) X Experience Modifier = PREMIUM Here, the two most important variables affecting premium are the rate and the experience modifier, also known as the EMR or X-mod. Equation Translation To better understand how work comp consultants calculate your rate, it pays to fully understand the knowledge behind the numbers. Classification rates reflect occupational risk: The likelihood a worker will be injured on the job. (Think: Clerical personnel versus welders and roofers.) Each industry’s classification is rated by the National Council on Compensation Insurance (NCCI) or state rating agency, with employers in similar industries sharing the same classification. The Payroll Effect Payroll is also a major element of your workcomp premium calculation, with your total payroll divided by 100 and multiplied by your EMR as described above. For example, if your total payroll is $500,000, and you have an EMR of $0.15; you would calculate your premium as: $500,000 ÷ 100 = $5,000 $5,000 × 0.15 = $750 The X-Mod Example Your X-Mod or EMR is another element essential to your rate. This number is a numeric representation of your business’ actual loss history compared to the average of others in your industry. Like your classification rate, the average industry rate is calculated by the NCCI or your state rating bureau.