What is EMR Rating in Construction? Complete Guide 2025

EMR (Experience Modification Rate) shows how many workers’ comp claims a construction company has compared to others doing similar work. A rating of 1.0 means average, below 1.0 means fewer claims, and above 1.0 means more accidents and higher insurance costs than normal.

You need to know about EMR ratings when hiring subcontractors because they tell you which ones are likely to have accidents on your job sites and cost you money. Subs with bad EMR ratings above 1.2 have ongoing safety problems and pay way more for insurance, which means higher bids and higher risks for you. Many projects now require good EMR ratings just to qualify for bidding, so you need subs who can actually get approved for the job.

PreQual by Vertikal RMS checks EMR ratings automatically, along with financial records and, by integration with CertFocus by Vertikal RMS, insurance certificates, so you can spot problem subcontractors before they cause expensive problems on your projects. You get complete risk profiles instead of hoping the cheapest bidder won’t create disasters that cost more than you saved.

What Does EMR Rating Mean in Construction?

EMR rating in construction stands for the Experience Modification Rate, which is a numerical factor that compares your company’s workers’ compensation claims history to other businesses in your industry. An EMR of 1.0 is the industry average, with ratings below 1.0 indicating above-average safety performance and ratings above 1.0 showing higher risk. In short, a lower EMR rating is always better.

Your EMR rating is a multiplier for workers’ compensation premiums, which means that a company with an EMR of 1.2 pays 20% more than the base rate, while a company with an EMR rating of 0.8 pays 20% less. This is quite important for the bottom line when you consider that construction companies pay an average of $254 per month or $3,054 for workers’ compensation coverage per employee. A 20% increase would be around $600 per employee per year, or $60,000 per year for every 100 employees in the company.

Insurance carriers calculate EMR by comparing your actual claims experience over a three-year period to the expected claims for companies of similar size and industry classification. They consider both claim frequency and severity, with larger claims having a disproportionate impact on your rating. Since the average cost of a workers’ compensation claim is $44,179, just a handful of claims could completely derail your EMR.

How is EMR Calculated for Construction Companies?

Your EMR gets calculated by looking at how many workers’ compensation claims your company had over the past three years and comparing that to what’s normal for construction companies of your size. If you had fewer claims than expected, your EMR will drop below 1.0, and you’ll pay less for insurance. If you had more claims or expensive accidents, your EMR will go up, and your premiums will increase.

EMR Calculation Formula and Components

Insurance companies take your actual claims costs and divide them by what they expected you to spend based on your payroll and the type of work. What you get is your EMR multiplier.

The EMR formula is: Actual Rate ÷ Expected Rate

Where:

• Actual Rate = (Actual Primary Loss + Actual Excess Loss) x Expected Excess Loss
• Expected Rate = (Expected Primary Loss + Expected Excess Loss) x Expected Excess Loss
• Actual Primary Loss: The total dollar amount of all workers’ comp claims under $17,000 during your three-year experience period. These smaller claims get counted at full value in the EMR calculation.
• Actual Excess Loss: Claims above $17,000 get discounted in the calculation to prevent a single catastrophic accident from unfairly penalizing companies. Only a portion of these large claims counts toward your EMR.
• Expected Primary Loss: Multiply your payroll by your industry’s expected loss rate to determine what the industry predicts for claims. If your payroll is $500,000 and your expected loss rate is 4.2%, your expected primary loss would be $21,000.
• Expected Excess Loss: The portion of expected losses above the primary threshold. State agencies determine these figures every year based on industry claims patterns.

Here’s an example of how to calculate the EMR rate. Let’s say a construction company with $500,000 annual payroll and a classification rate of 4.2%:

• Actual Primary Loss: $15,000
• Actual Excess Loss: $8,000 (discounted)
• Expected Primary Loss: $21,000 ($500,000 from payroll times the 4.2% classification rate)
• Expected Excess Loss: $12,000

Then, taking these numbers and plugging them into our formula:

• Actual Rate = ($15,000 + $8,000) × $12,000 = $276,000,000
• Expected Rate = ($21,000 + $12,000) × $12,000 = $396,000,000
• EMR = $276,000,000 ÷ $396,000,000 = 0.70

So, this company would receive an excellent EMR of 0.70. That means they would pay 30% less than the standard workers’ comp rate.

Do All States Use the Same EMR Formula?

Most states use the same National Council on Compensation Insurance (NCCI) formula explained above, but California, New York, and Texas calculate EMR differently with their own systems. These states might use different time periods or weigh claims differently, so your EMR could vary depending on where you work. If you work in multiple states, you might get different EMR ratings in each state based on your claims and payroll in that specific location.

What’s Considered a Good EMR Rating for Construction?

Anything below a 1.0 is a good EMR rating for construction companies, with ratings under 0.75 considered excellent. Most general contractors prefer working with subcontractors who have EMRs below 1.0, as this demonstrates an above-average commitment to safety.

Here’s a comparison of different companies with the same base premium so you can see how the EMR rating can affect the final premium:

EMR Rating Scale and Benchmarks

Construction companies can use EMR benchmarks to understand where their safety performance ranks compared to industry standards and what improvements might unlock better insurance rates and business opportunities. You can break down EMR ratings in four categories:

• Excellent ratings (0.50-0.75): Companies getting EMR ratings in this range show exceptional safety performance that sets them apart from competitors. These ranges are usually the result of comprehensive safety programs, regular training, and strong safety cultures that prevent most workplace accidents. Insurers reward these companies with significant premium discounts on workers’ comp compared to average performers.
• Good ratings (0.75–0.95): EMR ratings in this range represent a solid safety performance that provides competitive advantages in bidding and prequalification processes, along with insurance savings. Companies with good EMRs demonstrate consistent safety practices. Most general contractors see these ratings favorably when choosing subcontractors, and companies can use good EMRs as selling points when competing for projects.
• Average ratings (1.0): An EMR of exactly 1.0 indicates average safety performance that meets industry standards but provides no competitive advantages or cost savings. Companies with average EMRs pay standard workers’ compensation rates without discounts or penalties. While this rating won’t eliminate you from most bidding opportunities, it also won’t help you stand out from competitors or reduce insurance costs.
• Poor ratings (1.0+): EMR ratings above 1.0 mean a below-average safety performance that can limit business opportunities and increase insurance costs significantly. Companies with EMRs above 1.0 pay premium surcharges that increase workers’ compensation costs by 10–50% or more, depending on how high the rating climbs. Many general contractors exclude subcontractors with EMRs above 1.2 from bidding opportunities, and some public projects mandate maximum EMR thresholds that eliminate high-risk contractors.

How Does EMR Affect Subcontractors?

EMR ratings directly impact a subcontractor’s ability to secure work and compete effectively in the construction market. Poor EMR ratings can eliminate subcontractors from bidding opportunities, while excellent ratings open doors to premium projects and cost savings.

Project Qualification and Bidding Restrictions

Many general contractors establish maximum EMR thresholds as prequalification requirements, usually excluding subcontractors with ratings above 1.2 from bidding consideration. Government projects frequently mandate strict EMR limits that bar subcontractors with EMRs above 1.0 from participating.

You can see this from actual real-world experience. A USI Insurance Services case study found an industrial service provider that struggled to qualify for projects with a 1.16 EMR rating. After conducting an experience modification analysis and reporting corrected data to NCCI, their EMR dropped to 0.94, which allowed them to bid on and win contracts worth over $15 million while saving $84,000 in premiums over three years.

Insurance and Bonding Considerations

Insurance carriers adjust their appetite for subcontractors based on EMR ratings, with some refusing coverage or demanding higher premiums for companies with poor safety records. Subcontractors with high EMRs may face:

• Limited insurance carrier options
• Higher insurance premiums
• Reduced bonding capacity from surety companies concerned with risk exposure
• Stricter policy terms and conditions that limit coverage flexibility
• Required safety program participation as a condition of coverage renewal

Client perception is another thing to consider, as EMR ratings signal safety culture and professional competence to potential customers. Subcontractors with excellent EMRs can market their exceptional safety performance as a competitive advantage, while those with poor ratings must overcome negative perceptions during the selection process.

What Factors Impact Your Construction Company’s EMR?

Factors like claim frequency and severity, lost-time claims, the experience period lag time, payroll size, and construction classification affect your rating for years after an incident occurs. Knowing which factors can cause your EMR to go up or down gives you a good idea of what to focus on to improve your company’s safety culture and lower your insurance costs.

These are the biggest factors that impact your EMR rating:

• Claim frequency vs. severity weighing: EMR calculations penalize companies with frequent small claims more heavily than those with occasional large claims. Multiple $5,000 medical bills hurt your EMR more than one $50,000 catastrophic claim because frequent accidents suggest ongoing safety problems.
• Medical-only vs. lost-time claims: Lost-time claims that require employees to miss work carry significantly more weight in EMR calculations than medical-only claims. Even minor injuries that result in one day off work can impact your EMR more than expensive medical treatments that don’t require time away.
• Open claims and reserve estimates: Unresolved claims with outstanding reserves count toward your EMR based on estimated costs rather than final settlements. High reserves on open claims can inflate your EMR until claims close, which means resolving claims quickly is important to keep a low EMR rating.
• Experience period lag time: Safety improvements today won’t improve your EMR rating for 2–3 years because calculations use historical data from a specific three-year window. This lag means poor safety years will continue affecting your EMR after you implement safety improvements.
• Payroll size and credibility: Larger companies receive more credible EMR ratings because their payroll provides more statistical data for accurate calculations. Small companies face greater EMR volatility from individual claims due to limited payroll bases.
• Construction classification codes: Different construction trades have varying baseline risk factors built into EMR calculations. For example, roofing and demolition work usually face higher expected loss rates than finish carpentry or painting.
• Ballast value protection: Smaller construction companies receive ballast value adjustments that prevent dramatic EMR swings from single large claims, while larger companies with massive payrolls get less protection from EMR volatility.

How Can You Improve Your Construction Company’s EMR Score?

You can improve your EMR rating by improving your company’s safety record to reduce claim frequency and severity over time. Since EMR calculations use three years of historical data, improvements take time to reflect in your rating.

Here are some proven strategies to improve your company’s EMR rating:

1. Implement comprehensive safety training programs: Regular safety training and daily toolbox talks keep safety awareness high and teach workers to identify and avoid hazards before accidents occur. Focus training on your most common injury types and set up systems for new employees to receive thorough safety orientations before starting work.
2. Conduct daily safety inspections: Systematic daily inspections help identify and correct hazards before they cause injuries. Assign specific workers to conduct inspections, document findings, and correct safety issues quickly before they lead to workers’ compensation claims.
3. Establish safety incentive programs: Reward crews and individuals for achieving safety milestones, reporting near misses, and maintaining accident-free periods. Positive reinforcement encourages safety-conscious behavior and creates peer pressure to maintain safe work practices across your workforce.
4. Maintain detailed safety documentation: Document all safety training, inspections, incidents, and corrective actions to demonstrate your commitment to workplace safety. Keeping the right documentation will help you manage your claims and show insurance carriers that you take safety seriously.
5. Report injuries immediately and investigate thoroughly: Get injured workers to medical care right away because fast treatment usually means cheaper claims and workers get back on the job sooner. Figure out what caused every accident so you can fix the problem and stop it from happening again.
6. Develop effective return-to-work programs: Find light-duty work for injured employees so they can come back to work even if they can’t do their regular job yet. Getting people back to work fast keeps your lost-time claims down and shows you care about your workers.
7. Monitor claims actively and manage reserves: Stay on top of every workers’ comp claim by talking to your insurance company and making sure injured workers get appropriate treatment. Don’t let insurance companies set huge reserves on claims that should cost much less.
8. Partner with quality medical providers: Find doctors and clinics that understand construction injuries and focus on getting your workers healthy and back to work quickly. Good medical care means shorter, cheaper claims.
9. Screen employees for job fitness: Make sure new hires can handle the physical demands of construction work before you put them on a job site. Workers who aren’t physically ready for the work get hurt more often.
10. Maintain equipment and enforce safety protocols: Keep your equipment in good working condition and verify that all workers follow all safety rules every day. Broken equipment and ignored safety procedures cause accidents that hurt your EMR.

EMR Verification and Prequalification Process

General contractors can verify subcontractor EMR ratings by requesting current workers’ compensation certificates of insurance that list the EMR multiplier, or by obtaining EMR verification letters directly from insurance carriers or state rating bureaus. Manual verification is extremely time-consuming when managing dozens of subcontractors across multiple projects, which is why prequalification solutions like PreQual by Vertikal RMS are so popular.

These platforms can collect and verify EMR documentation as part of a comprehensive subcontractor evaluation. They’ll collect the subcontractor’s current workers’ compensation policy showing the EMR rating and verify that the coverage remains active throughout the project period.

EMR vs Other Construction Safety Metrics

EMR ratings show you workers’ compensation claims history, but only tell part of the story. Other safety metrics like OSHA incident rates and injury frequency measures give you different angles on workplace safety that complement EMR data when assessing risk.

Here’s a comparison of safety metrics used in the construction industry:

Protect Your Projects with PreQual by Vertikal RMS

EMR ratings tell you about past workers’ compensation claims, but they don’t tell you if a subcontractor has enough cash to finish your project or if their insurance will actually cover claims when accidents happen. You need to know about financial stability, current insurance status, and project completion history before you hand over a contract and hope for the best.

PreQual by Vertikal RMS checks everything that matters, including EMR ratings, financial statements, insurance certificates, and safety records in one evaluation process. Our expert financial analysts review each subcontractor’s books to catch cash flow problems that could leave you with half-finished work and unpaid suppliers demanding money from you.

You’ll get clear, customized scorecards that show which subs are trustworthy and have the financial strength and insurance coverage to complete your project safely. Stop rolling the dice on subcontractors who sound good in theory but only create expensive problems on your job sites. Contact Vertikal RMS today to see how PreQual protects your projects by finding subs with proven track records before problems start.