Texas Workers’ Compensation Cost (2025): Premium Drivers & Discounts
Texas Workers’ Compensation Cost (2025): Premium Drivers & Discounts
What will you actually pay for workers’ comp in Texas in 2025? Your premium hinges on a few levers: industry class code, audited payroll, your experience modification factor (E-Mod), and carrier credits (e.g., deductibles or schedule rating). The good news: statewide loss costs have generally trended down in recent years, and smart safety + classification can trim premiums by 10–25% (results vary by account and carrier).
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1. Basic rate structures in Texas
Texas uses filed rates (or loss costs + carrier factors) organized by industry classification. Your manual premium is generally calculated as:
Manual Premium = (Class Rate per $100 of payroll) × (Auditable payroll) ÷ 100 × (E-Mod) × (Carrier factors & taxes/assessments)
- Rate shopping matters: TDI publishes a workers’ comp rate guide to help employers compare carriers and relativities statewide.
- Uniform framework: Texas requires use of department-established hazard classifications, and maintains a uniform experience rating plan adopted by the commissioner.
- Auditable policy: All policies are subject to a final payroll audit—your estimated premium can be adjusted up or down based on actual payroll and classifications at year-end.
2. Class codes & payroll influence
Your class code reflects the inherent risk of your operations and drives the base rate. Higher-risk work (e.g., framing carpentry) carries higher rates than lower-risk clerical or sales classifications. Payroll is reported by class and expressed per $100.
- Who’s in payroll: Texas rules define what remuneration to include/exclude (e.g., some overtime premiums may be excluded). Owners/officers can often elect to include/exclude themselves; some owner payrolls are set at a fixed amount based on the state average weekly wage when included (check your policy endorsement).
- Multiple classes: If you have distinct operations (shop + installation), accurate separation of payroll by class can materially reduce cost versus placing everyone in the highest-risk code.
- Documentation: Keep clean payroll records (timecards by job/task) to defend proper classification at audit.
| Component |
How it affects cost |
2025 planning tip |
| Class code |
Sets the base rate per $100 payroll; riskier work → higher rate. |
Map every role to the correct code; avoid over-broad “lumping.” |
| Audited payroll |
Premium scales directly with payroll by class. |
Track job-costing and verify owner/officer inclusions or exclusions. |
| E-Mod (experience mod) |
>1.00 raises premium; <1.00 lowers it versus average risk. |
Target loss frequency reduction; close claims quickly. |
| Credits/discounts |
Schedule credits, deductibles or network participation can reduce net premium. |
Ask carriers for alternative rating plans and deductible options. |
| Audit adjustments |
End-of-term audit recalculates premium from actuals. |
Reconcile payrolls promptly; keep certificates for subs. |
3. Experience mod and safety programs
The experience modification factor compares your claims to expected losses for your industry/size. An E-Mod of 1.00 is average; 0.80 would apply a 20% credit, while 1.20 would add 20% to the mod-rated portion of your premium.
- Medical-only vs lost-time: Texas experience rating follows the state’s plan; many carriers use NCCI methodology with Texas-specific exceptions. The common takeaway: fewer, smaller claims lower your E-Mod over time.
- Safety leverage: Implement return-to-work/light-duty, near-miss reporting, job hazard analyses, and supervisor training. These reduce claim frequency and keep reserves down.
- Healthcare networks: Using approved workers’ comp healthcare networks and cost-containment strategies may qualify for carrier credits and is encouraged by state policy.
4. Discounts and audits
Beyond your E-Mod, carriers can apply additional credits/charges:
- Schedule rating: Underwriting credits/debits for risk characteristics not captured in class/E-Mod (safety culture, housekeeping, management controls).
- Deductible programs: Many Texas carriers must offer deductibles to qualifying employers; selecting a deductible can reduce premium while you reimburse small claims.
- Other adjustments: Minimum premiums, expense discounts on small policies, and premium installment plans may apply per filed rating plans.
- Annual audit: Every policy is subject to a final audit; misclassified work, uninsured subs, or under-reported payroll can trigger additional premium.
5. How to budget for 2025 premiums
Use realistic payroll by class, your current E-Mod, and carrier rate indications. Below are quick, numeric scenarios to stress-test your budget.
Case Study A — Small service firm (clerical + outside sales)
Payroll: $600,000 total (CLERICAL $400k @ $0.25, OUTSIDE SALES $200k @ $0.45).
Base manual premium: ($400,000×0.25%)+($200,000×0.45%) = $1,000 + $900 = $1,900.
E-Mod: 0.90 → $1,710.
Schedule credit: −10% → $1,539 (before taxes/assessments).
Lesson: Even modest credit factors on low-risk classes create meaningful savings.
Case Study B — Mid-size contractor (carpentry + clerical)
Payroll: Carpentry field $2,000,000 @ $6.50; Clerical $200,000 @ $0.25.
Manual premium: ($2,000,000×6.5%)+($200,000×0.25%) = $130,000 + $500 = $130,500.
E-Mod: 1.15 → $150,075.
Choose $2,500 deductible: −7% → $139,569 (approx.).
Lesson: The E-Mod drives cost. Reducing minor losses and adopting light-duty can swing tens of thousands at renewal.
Case Study C — Owner payroll treatment
Some owner officers/sole proprietors included on the policy are rated using a fixed annual payroll figure tied to the state average weekly wage when included (varies by endorsement). If your class rate is high, that fixed amount can meaningfully affect premium—review inclusion/exclusion options with your agent and carrier.
FAQs
Does the owner count toward payroll?
It depends on your policy endorsements. Owners/officers can often elect to include or exclude; when included, Texas carriers may rate them at a fixed annual payroll tied to the SAWW. Confirm inclusion status and the dollar amount shown on your policy.
What’s an experience mod (E-Mod)?
Your E-Mod compares your past claim losses to expected losses for similar firms. A 1.00 mod is average; below 1.00 reduces premium on the mod-rated portion, above 1.00 increases it. Fewer, smaller claims typically push the mod down over time.
How can we reduce premiums?
Improve safety and claim handling (near-miss reporting, training, return-to-work), verify correct class codes, separate payrolls by task, consider deductibles, and work with approved medical networks. Ask carriers for schedule-rating credits if your controls exceed industry norms.
Are part-time employees included in payroll?
Yes. Premium is based on total auditable remuneration for covered workers—full-time and part-time—allocated by class code per Texas rules and your policy terms.
Will we be audited?
Yes. Texas workers’ comp policies are subject to a final audit at term end. Keep payroll records, overtime details, owner/officer endorsements, and certificates for subcontractors to avoid additional premium due.
Key Takeaways
- Costs vary by class, payroll and E-Mod: Budget with realistic payroll splits and your latest mod.
- Safety pays: Cutting claim frequency and using light-duty often yields double-digit savings via mod and underwriting credits.
- Leverage rating options: Ask about schedule credits, deductibles, and healthcare network participation.
- Prepare for audit: Clean records and correct classification prevent surprise additional premiums.
References
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