Workers Compensation Experience Modification Rate: The #1 Strategy to Lower Your Costs

12 min read
Workers Compensation Experience Modification Rate: The #1 Strategy to Lower Your Costs

Your workers comp bill just went up 40%. You didn’t even know it was coming.

That’s what a bad Experience Modification Rate does. It multiplies your premium every single year — silently, automatically, and legally. For three years minimum.

Most small business owners don’t know their EMR exists until they’re already paying for it. By then, it’s cost them $50,000. Sometimes more.

Here’s what matters: you can control it. And the businesses that do save thousands.

Table of Contents

What Is an Experience Modification Rate (EMR)?

Your EMR is a number. That number multiplies your workers compensation premium.

It compares your claims history to other businesses in your industry. Think of it as your safety credit score.

  • EMR = 1.0 → You’re average. You pay the baseline rate.
  • EMR = 0.75 → You’re 25% better than average. You get a discount.
  • EMR = 1.25 → You’re 25% worse. You pay a penalty.

Example: Base premium: $100,000/year EMR 1.25 = You pay $125,000 EMR 0.75 = You pay $75,000

That’s a $50,000 swing. Every year. For three years after each claim.

The Real Cost of One Injury

One injury means more than medical bills. Before we go further, let’s take a quick detour to clarify what really happens:

Direct Costs (What Insurance Covers):

  • Medical treatment
  • Lost wages
  • Rehabilitation

Uninsured Costs (What You Pay Out of Pocket):

  • Overtime for other workers covering the injured employee
  • Lost productivity while you’re short-handed
  • Time spent investigating the incident
  • Training replacement workers
  • Damaged equipment or materials
  • Administrative time processing claims
  • Supervisor time managing the situation
  • Decreased morale across your team
  • Potential contract losses if you can’t deliver

The Multiplier:

Studies show uninsured costs run 4-5x higher than direct costs. A $10,000 claim actually costs your business $50,000-$60,000.

How Your EMR Gets Calculated

Okay, now back to your experience modifier rate situation. Insurance carriers look at three years of claims data (not including the most recent year).

They measure three things:

  • Frequency — how many claims you had
  • Severity — how much each claim cost
  • Expected vs. actual — how you compare to businesses like yours

Here’s what kills most small businesses: frequency matters more than severity.

Five small claims hurt you more than one big one. That’s why prevention beats everything else; it’s the one thing you can actually control.

The #1 Way to Lower Your EMR

Stop injuries before they happen.

Everything else — claims management, return-to-work programs, incident investigations — matters. But nothing beats prevention. Don’t misunderstand, you need those things too, but that is only after prevention efforts have failed. It’s like avoiding an injury is better than trying to control the bleeding after one— bad example I know, but you get the point.

Here’s why an ounce of prevention is worth a pound (or in this case a ton) of cure:

1. Every Injury You Avoid Doesn’t Hit Your Mod

Obvious, but often ignored. Strong safety programs identify hazards before someone gets hurt. That breaks the cycle that drives up your rate. If you are really serious, implement two things: a Near Miss Reporting program and Stop Work Authority. Those two things you can and should do today. If you need help, check out our blog on creating a Near Miss Reporting program, and we have a toolbox talk on Stop Work Authority. They cost almost nothing to implement.

2. Safety Leadership Creates Culture

When safety becomes the norm, employees stop incidents before they start. When leaders make it clear that the organization is going to take measures to prevent claims. Claims will drop across every part of your operation— I have seen it, it works. If you need help here, we have a blog article on implementing safety programs that covers leadership and alignment, and how to go beyond employee “buy-in”. It’s a quick read and can get you going in the right direction.

3. Insurance Carriers Notice

Documented safety programs signal lower risk. Some carriers offer better terms. All of them see you differently when you’ve got proof. The Smarter Risk app can generate a risk report that you can share with your insurer, showing them documented improvements.

4. The ROI Hits Immediately

It takes three years for claims to age off your EMR. But every day without an injury moves you closer to a better rate.

Plus: fewer injuries = less downtime, lower indirect costs, higher productivity, better morale.

See the full picture in our post on the hidden costs of workers comp.

Want numbers? Use our Safety ROI Calculator. Input your current claims data. See exactly how much you’ll save.

Want a study that shows these results in the real world: check out this blog post: The Study That Should Have Changed Workers’ Comp Forever, in it we discuss and link to a 2012 OSHA study that proved safety programs cut claims by 52%, claims costs by 80%, and lost time by 87%. Nobody listened. I hope you will.

What Your Safety Program Needs

Don’t overcomplicate it. These six components move the needle:

Risk Assessment

Identify the high level hazards and risk your company is exposed to. Use our free risk assessment — it takes minutes and gives you an action plan. No guessing. No exactly what needs to be done.

Training Programs

New hire orientation. Job-specific training. Emergency protocols. Training isn’t one-and-done. It’s ongoing. See our post on new hire orientation.

Written Policies

PPE requirements. Incident reporting. Clear documentation. No guessing. No exceptions. If you don’t have policies in place or yours are outdated, the Smarter Risk app can generate them in a few clicks. Don’t waste 6 months in meetings trying to figure out what you need in a policy and then writing it from scratch. Don’t use templates from the internet either; they are usually generic and inadequate.

Safety Meetings

Short. Frequent. Focused. Keep safety top of mind. We’ve got almost 200 free toolbox talks ready to use.

Incident Investigations

When something happens, find out why. Fix it. Make sure it doesn’t happen again. Read our guide on accident investigation.

Return-to-Work Programs

Get injured workers back to work quickly — even on light duty. It reduces claim costs and improves your EMR. More details on that in our return-to-work blog post.

How Smarter Risk Makes This Simple

Most small businesses can’t afford a full-time safety manager. They definitely can’t afford consultants at $200/hour. And if you don’t want to read all these blogs. Don’t. Our app identifies your risk, creates a plan, tracks your progress, creates your safety and risk control program, and provides training.

Smarter Risk gives you enterprise-level safety programs for 80% less than traditional methods. And we make the process 90% faster than manual improvements. Let’s say you hire a full-time Risk Manager who works 40 hours per week, and it takes 18 months to create your program and see its effectiveness. That is over 3000 man-hours. That is not only time-consuming but expensive.

That’s the problem we solved.

AI-Powered Risk Assessments

RISK-B — our AI assistant — guides you through your risk assessment in minutes. No safety expertise required.

It’s thorough. It’s accurate. It’s fast. And it eliminates the hours you’d normally spend fumbling through checklists.

Safety Programs Built in Clicks

Need a written safety program? We generate one tailored to your operation — aligned with OSHA, NFPA, ANSI, and ISO standards.

  • Customized policies and procedures
  • Hazard assessment templates
  • Incident investigation protocols
  • All ready to use

We don’t hand you a binder and walk away. Our app helps your team implement everything — so it actually gets done.

Real-Time Tracking

Complete a safety improvement? Your risk score and report updates instantly.

You see which recommendations are done. When they were finished. Photo verification included.

You always know where you stand. So does your insurance carrier. There is a reason we use the tagline –Assess, Improve, Share.

Training That Works

Knowledge prevents injuries. Our training library includes:

  • New hire orientations
  • Job-specific training
  • Supervisor training
  • OSHA compliance courses
  • Emergency response training

All accessible. All practical. All designed to reduce claims.

What Makes Us Different

  • Affordable — 80% less than traditional consulting
  • Practical — Built for business owners, not safety professionals (as most platforms are)
  • Measurable — Track improvements in real-time with our Safety ROI Calculator
  • No expertise required — RISK-B guides you every step

Businesses see meaningful drops in incident rates within the first year. EMR improvements follow as claims data updates.

But beyond the numbers: better engagement, lower turnover, higher productivity.

Your Action Plan to Lower Your EMR

Don’t wait. Every day you delay costs you money.

This Month

Next 90 Days

  • Build or update your written safety programs
  • Set up formal incident reporting
  • Start regular safety training
  • Buy Smarter Risk to automate the whole process

Ongoing

  • Make safety a standing agenda item
  • Track leading indicators (near misses, observations) not just injuries — see our post on leading indicators
  • Keep improving based on feedback
  • Celebrate safety wins, give out safety awards, and provide incentives like paid lunches for the whole team to celebrate quarters without incidents. I have done this, and they work. They get the entire team pulling in the same direction. But don’t make it some generic lunch; you are there to celebrate a win and show appreciation to your employees for working safely.

The Bottom Line

Your EMR isn’t just a number. It’s a tax on every injury you’ve ever had.

Small businesses that invest in safety don’t just lower their mod. They build stronger companies with better teams and healthier profits.

The question isn’t whether you can afford safety. It’s whether you can afford not to invest in it.

With the right tools, lowering your EMR is simple.

FAQs

What is a good experience modification rate?

Below 1.0 is good. Below 0.85 is excellent. The lower your rate, the less you pay for workers comp. Competitive businesses typically aim for rates between 0.75 and 0.95. Many general contractors require subcontractors to have an EMR of 1.0 or lower to even bid on projects.

How long does it take to improve your EMR?

EMR uses three years of claims history (excluding the most recent year). Significant improvements take 2-4 years to fully show up. But preventing new claims stops your rate from climbing further — immediately. Companies that implement comprehensive safety programs typically see a 52% reduction in injuries, which translates to dramatic EMR improvements over time.

Can you negotiate your EMR?

No. It’s calculated using standardized formulas. You can request an audit if you think there are errors. But the only real way to improve it? Safety programs and claims management.

Why does frequency hurt my EMR more than severity?

This is critical: five small claims hurt you more than one big one. That’s because of the Primary Threshold concept. Once a claim exceeds your PT (often around $20,000), additional costs above that threshold have less impact on your EMR. The rating system penalizes businesses with many preventable small accidents rather than occasional catastrophic events.

How does my EMR affect my ability to bid on contracts?

Your EMR can be a deal-breaker for contract eligibility, especially in construction, manufacturing, and government work. Many general contractors set hard cutoffs—commonly requiring an EMR of 1.0 or lower, with some requiring 0.95 or better for larger projects. You could have the lowest bid but get disqualified if your EMR exceeds the threshold.

What does a comprehensive safety program cost, and what’s the ROI?

A comprehensive written safety program through Smarter Risk costs $500 annually—far less than the cost of a single workplace injury. The ROI is typically immediate. Businesses with written safety programs see an average 52% reduction in injuries. If you currently have 10 injuries per year averaging $45,000 each in direct costs, a 52% reduction saves you approximately $234,000 annually in direct costs alone—plus hundreds of thousands more in indirect costs and premium reductions.

Are safety program recommendations tailored to my specific industry?

Yes! Smarter Risk’s Safety Program Builder creates customized policies specifically tailored to your industry and operations—not generic templates. Whether you’re in construction, manufacturing, retail, hospitality, or any other industry, the system generates policies that address your specific hazards and regulatory requirements. The free risk assessment analyzes your business to identify your unique risks and provides a customized action plan.

Can I dispute my EMR if I think there are errors?

Yes! Some studies estimate that up to 40% of EMR calculations contain errors. Common mistakes include claims from previous owners being attributed to your business, duplicate claims, incorrect payroll figures, claims that should have been closed but remain open, and wrong injury codes. Request your EMR worksheet from your insurance carrier annually and review it line by line with your agent. If you find errors, you can dispute them through your state’s rating bureau.

Stop Overpaying for Workers Comp

Don’t let a bad EMR drain your profits.

Smarter Risk helps small businesses build safety programs that work — and save thousands on insurance.

Sign up today for your free risk assessment. See exactly what you need to do to lower your rate.

Or use our Safety ROI Calculator right now. See how much you could save.

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About the Author

John Morlan - Founder of Smarter Risk

John Morlan

Founder & CEO, Smarter Risk

John Morlan is the founder of Smarter Risk, a platform helping small businesses implement practical safety and risk control programs. With years of experience in workers' compensation and risk management, John has helped businesses reduce their risk and save on insurance costs through proactive risk control and safety strategies.