Workers’ Comp & PEO Glossary

Plain-English definitions of the workers’ compensation and PEO terms business owners run into most. Bookmark this page, or email sales@tarsusrisk.com if a term you are seeing is not here.

PEO (Professional Employer Organization)

A firm that co-employs your staff and administers payroll, taxes, benefits, and workers’ compensation under a shared arrangement. Employees are covered under the PEO’s master workers’ comp policy rather than a policy in your business’s own name.

Workers’ Compensation

State-regulated insurance that pays for medical care and lost wages when an employee is injured on the job. Most states require it for businesses with employees.

Experience Modification Rate (Mod / EMR)

A multiplier comparing your actual claims history to the expected losses for a business of your size and class. Above 1.00 increases premium; below 1.00 lowers it.

Class Code

A four-digit number that groups employees by the type of work they do and its injury risk. Each code carries a rate, and it is one of the largest drivers of premium.

NCCI

The National Council on Compensation Insurance, the rating bureau that maintains class codes and experience-rating rules in most states. Some states, including California, use their own independent bureau.

Premium Audit

The end-of-term reconciliation comparing the estimated payroll a policy was priced on to actual payroll, resulting in either a credit or an additional bill.

Loss Run

A carrier-produced report of your claims history over a set period. It is the record carriers use to quote your account and is essential when shopping coverage or leaving a PEO.

SUTA

State Unemployment Tax Act contributions. Leaving a PEO mid-year can reset your SUTA rate and wage base, which can affect near-term cost.

Certificate of Insurance (COI)

Proof that a subcontractor carries their own coverage. Without a valid COI for the policy period, a subcontractor’s payroll is typically added to your workers’ comp bill at audit.

Governing Classification

The class code that describes a business’s primary operation. Standard exception codes such as clerical, outside sales, and drivers are split out separately at lower rates.

Assigned Risk / State Fund

The market of last resort for businesses that cannot obtain coverage in the standard market, often at higher cost. An advocate’s goal is usually to place you in the voluntary market instead.

Administrative Fee

The markup a PEO charges for its services, typically expressed as a percentage of payroll or per employee. Understanding this fee is central to evaluating whether a PEO is priced competitively.