📊 EMR Explained
Your Experience Modification Rate (EMR) directly affects your insurance costs and your ability to win work. Here's everything you need to know.
What is EMR?
The Experience Modification Rate (EMR) is a number that compares your company's workers' compensation claims history to other companies of similar size in your industry.
- EMR of 1.00 = Average for your industry
- EMR below 1.00 = Better than average (fewer/smaller claims)
- EMR above 1.00 = Worse than average (more/larger claims)
How EMR Affects You
Insurance Premiums
Your workers' comp premium is calculated as:
Premium = Manual Rate × Payroll × EMR
Example:
- Manual rate: $15 per $100 of payroll
- Annual payroll: $1,000,000
- Base premium: $150,000
| EMR | Premium | Savings/Cost |
|---|---|---|
| 0.75 | $112,500 | Save $37,500 |
| 1.00 | $150,000 | Baseline |
| 1.25 | $187,500 | Pay $37,500 more |
A 0.25 difference in EMR = $37,500/year on a $1M payroll.
Bid Eligibility
Many project owners require:
- EMR under 1.0 to bid
- Some require under 0.85 or 0.90
- Higher EMR = fewer opportunities
Prequalification
GCs evaluate subs on EMR. A high EMR means:
- Harder to get prequalified
- May be excluded from bid lists
- Perception of poor safety culture
How EMR is Calculated
The Formula (Simplified)
EMR = Actual Losses / Expected Losses
Actual Losses = Your claims over 3 years (excluding most recent year)
Expected Losses = What similar companies in your industry/size would expect
The 3-Year Window
EMR uses data from 3 policy years, excluding the most recent year:
| Year | Used in Calculation? |
|---|---|
| 2024 (current) | No |
| 2023 | Yes |
| 2022 | Yes |
| 2021 | Yes |
| 2020 | No (too old) |
Claims stay on your EMR for 3+ years. A bad year affects you long after.
Primary vs Excess Losses
Not all claim dollars count equally:
- Primary losses (first ~$18,000) = Count at full weight
- Excess losses (above ~$18,000) = Count at reduced weight
This means:
- Frequency matters more than severity
- 5 small claims hurt more than 1 large claim
- Medical-only claims count less than lost-time claims
Strategies to Lower EMR
Prevention (Most Important)
| Action | Impact |
|---|---|
| Strong safety program | Fewer claims |
| Safety training | Fewer incidents |
| Proper PPE enforcement | Reduced injuries |
| Hazard identification | Prevent incidents |
| Pre-task planning | Anticipate risks |
The best way to lower EMR is to prevent injuries.
Claims Management
When injuries do occur:
- Report immediately — Delayed reporting increases costs
- Investigate thoroughly — Understand root cause
- Return to work programs — Modified duty reduces lost time
- Stay involved — Monitor treatment and recovery
- Challenge questionable claims — Fraud happens
Medical-Only vs Lost-Time
- Medical-only claims count at ~30% of lost-time
- Getting injured workers back to modified duty keeps claims as medical-only
- One lost-time claim can equal several medical-only claims
Audit Your Mod
Your EMR calculation can have errors:
- Incorrect classification codes
- Claims charged to wrong policy year
- Claims that should be excluded
- Incorrect payroll figures
Request your EMR worksheet from your insurance carrier and verify every number.
Common Mistakes
1. Ignoring Small Claims
Small claims add up quickly due to primary loss weighting. Don't dismiss "just a minor injury."
2. Not Having Return-to-Work Program
Without modified duty, minor injuries become lost-time claims.
3. Late Reporting
Reporting delays increase claim costs and look bad to adjusters.
4. Not Investigating Incidents
Without investigation, you can't prevent recurrence.
5. Not Auditing EMR
Errors in your EMR calculation are common. Always verify.
What's a Good EMR?
| EMR Range | Rating |
|---|---|
| Under 0.75 | Excellent |
| 0.75 - 0.90 | Good |
| 0.90 - 1.00 | Average |
| 1.00 - 1.25 | Below average |
| Over 1.25 | Poor |
Timeline to Improve
Due to the 3-year calculation window:
- Improvements take 3+ years to fully show
- A bad year affects you for 4 years total
- Start improving now — results come later