What happens to your experience mod if a construction company joins a PEO?

General information, not insurance or legal advice. Have a licensed workers’ compensation broker and an attorney review your own situation. BRG is a broker and advisor paid by the provider selected in a competitive process; clients are not invoiced. That is a conflict worth knowing about when you read our view on PEOs.

How the experience modifier is built

NCCI’s “ABCs of Experience Rating” (copyright 1981-2021; retrieved 15 Oct 2026) says the plan compares an employer’s own payroll and loss data with similarly grouped employers: “Usually, the latest available three years of data is compared to similarly grouped employers to calculate the mod.” An employer with better-than-average loss experience receives a credit and one with worse-than-average experience carries a debit. The modifier is applied to premium: in NCCI’s own exhibit a $100,000 premium becomes $75,000 at 0.75, $100,000 at 1.00 and $125,000 at 1.25.

Policy years count if the policy effective date falls no less than 21 months and no more than 57 months before the rating effective date, and the current policy is not used. The same document says insurers need not report a policy’s data until 18 months after inception, so the modifier you pay today reflects claims that are one to several years old.

Each claim is split at a state-approved split point (the document says $18,000 in most states): the part below is “primary loss,” which reflects frequency, and the part above is “excess loss,” which reflects severity. Primary losses carry greater weight, so ten $5,000 claims push the modifier up more than one $50,000 claim. A state accident limitation caps any single claim, and medical-only claims are counted at 30% in most states under the Experience Rating Adjustment. The weight given to your own history rises with employer size. This document is from 2021, so current split points, limits and weights may differ and should be taken from the current plan manual.

Two limits matter for a mid-size employer. Experience rating is mandatory once an employer meets a state’s premium eligibility threshold. And NCCI says a modifier of 1.00 applies if an employer does not meet eligibility, has insufficient data, is new, or if “data could not be provided as a result of an ownership change.”

Class codes are the other half of the price

NCCI describes manual rating as grouping employers “according to their business operation or classification,” with rates reflecting the average cost of that class, and shows premium as payroll in each class divided by 100 times that class’s rate, before the modifier is applied. Its worked example is a roofing company with two classes, where the roofing rate is far above the clerical rate. Florida’s statute adds that the Division of Workers’ Compensation “may, by rule, establish codes and definitions” for the construction industry (s. 440.02(10), retrieved 15 Oct 2026). We did not obtain Florida’s class-code list, so this page gives no code numbers or rates. The practical point is separate from the modifier: a wrongly assigned class is its own cost, which is why how workers’ compensation is rated treats class-code review as its own lever.

What a PEO does with the modifier

Florida law makes a licensed employee leasing company “responsible for providing workers’ compensation coverage pursuant to chapter 440,” and requires it to file evidence of coverage for all leased employees and to keep for its carrier, for each client, a listing of covered employees by classification code and the eligible wages by classification code (s. 468.529(1)-(2), retrieved 15 Oct 2026). It must notify its carrier within 30 days of starting or ending a client relationship (s. 468.529(3)). Chapter 440 itself defines “employer” to include employee leasing companies (s. 440.02(19)(a)). None of that says whose modifier prices a client’s leased payroll.

The one state rule we read in full is Minnesota’s (Minnesota Experience Rating Plan Manual, Rule 5-A; 2008 edition; retrieved 15 Oct 2026), which is a Minnesota rule, not NCCI’s and not Florida’s. It says the experience of leased employees “shall be combined with the experience of all other employees of the client company” and that the client’s modifier applies to the policy the leasing company holds for those employees. Only the leasing company’s own non-leased employees go into the leasing company’s modifier. When a client ends the arrangement, “experience rating modifications are not impacted” and the client’s prior experience stays in its calculation. The manual also says master policies “are not applicable in the State of Minnesota.”

People in this market describe three ways a PEO can treat a client’s modifier: carry it forward onto the client’s leased payroll, blend it into a pooled rate, or replace it with the PEO’s own pricing. We did not find a regulator or rating-bureau document that sets out those three as categories, and which one applies to a Florida construction client under an NCCI master or coordinated policy is exactly what we could not confirm. BRG’s own page on how workers’ compensation is rated describes the common pooled pattern, in which the client’s own modifier may stop developing. The Minnesota rule above shows that is not universal, so ask for the structure and the modifier basis in writing rather than assuming either.

About savings claims: vendor pages surfaced in our research say a PEO can save “up to” a stated percentage of workers’ compensation cost for construction. We found no regulator, rating bureau or other neutral source for any such percentage, so this page states none. The only dollar figure we use is from BRG’s own engagement page: on a boat-manufacturer engagement, a competitive process cut workers’ compensation cost by $100,000, and the page attributes it to a rating question (testing on open water changed how payroll was classified), not to a general PEO effect. That is one manufacturer’s experience, not a construction benchmark or a forecast.

What an ownership change does: the ERM-14

NCCI says that when ownership changes “the employer must notify the insurance provider in writing within 90 days of the date of the change,” using the signed ERM-14 form or a signed letter on letterhead. It adds that “NCCI may issue, retract, and/or revise the current mod, and up to two preceding mods, due to ownership or combination changes,” that “the past experience of the business will be transferred to the new owner” generally, and that a change may alter the rating effective date. Businesses with “more than 50% common majority ownership” are combined into one modifier (retrieved 15 Oct 2026).

The ERM-14 instructions (NCCI, 2018; retrieved 15 Oct 2026) list the transactions the form covers: name or legal entity change; sale, transfer or conveyance of all or part of ownership; sale of physical assets to an entity that takes over operations; merger or consolidation; formation of a new entity that acts as, or in effect is, a successor to another; an irrevocable trust or receiver; formation of a new entity; and a determination of combinability of separate entities. NCCI “may request supporting documentation.” For a contractor this matters when owners reorganise, add a related company, or buy another firm, because the form is about continuity of experience, not paperwork. Minnesota’s manual lists “entities entering or leaving employee leasing arrangements” as not a change of ownership for that plan; we did not confirm the same wording in NCCI’s rule.

Florida construction-industry and officer-exemption basics

From the Florida Statutes text read on a republisher’s site (the official site was not reachable; retrieved 15 Oct 2026): “construction industry” means “for-profit activities involving any building, clearing, filling, excavation, or substantial improvement in the size or use of any structure or the appearance of any land” (s. 440.02(10)). Coverage applies to private employment with four or more employees but, “with respect to the construction industry,” to employment with one or more employees (s. 440.02(20)). A contractor who sublets work is liable for the subcontractor’s employees unless the subcontractor has secured coverage, must require evidence of insurance, and a subcontractor corporation with an exempt officer must give the contractor a copy of the certificate (s. 440.10(1)).

A corporate officer may elect to be exempt, but for construction the statute caps it: “no more than three officers of a corporation or of any group of affiliated corporations” may elect an exemption, and each must own at least 10 percent of the stock and be listed as an officer with the Division of Corporations (s. 440.02(18)(b)). An LLC member owning at least 10 percent counts as an officer (s. 440.02(11)). The notice is filed electronically with the department; each certificate is valid for 2 years, names the corporation, carries a $50 fee for construction industry requests, and “may be revoked” if the person no longer qualifies (s. 440.05). An exempt officer “may not recover benefits or compensation,” and carriers “may not consider” a valid exempt officer an employee when setting premium (s. 440.05(13)). A sole proprietor or partner engaged in construction is an employee under the statute (s. 440.02(18)(c)).

This is the statute’s text as we read it, not a how-to. Whether an exemption fits a given owner, and how it is treated under a PEO’s policy, are questions for the company’s broker and attorney. We did not read the department’s own guidance.

Monopolistic states and states with their own bureaus

NCCI’s document says the plan “does not apply in” the four monopolistic states (North Dakota, Ohio, Washington and Wyoming), which “administer their own plans and rates,” and also not in California, Delaware, Michigan, New Jersey or Pennsylvania. In Indiana, Massachusetts and North Carolina the state’s own rating organisation produces intrastate modifiers, and Minnesota, New York and Wisconsin take part in interstate rating only when exposure is in two or more participating states (retrieved 15 Oct 2026; list as of the 2021 document). If you have payroll in those states, each state’s own fund or bureau rules apply and we did not research them. A modifier does not simply carry across state lines.

Injury data and OSHA records

Federal injury recording rules sit alongside, not inside, the rating plan. Under 29 CFR 1904.1 a company with 10 or fewer employees at all times in the last calendar year is partially exempt from keeping OSHA injury and illness records, and size is judged on the entire company; all employers must still report a fatality, in-patient hospitalisation, amputation or loss of an eye (retrieved 15 Oct 2026). A case is recordable under 1904.7 if it results in death, days away from work, restricted work or job transfer, medical treatment beyond first aid, or loss of consciousness, or is a significant diagnosed injury. We did not confirm whether construction falls in the partially exempt industry list in 1904.2, and did not find a source linking OSHA recordability to how a claim affects a modifier, so do not assume they move together. For context, BLS’s 2024 table (read through the fetch tool’s summary only) gives a total recordable case rate of 2.2 per 100 full-time workers for construction against 2.3 for all private industry, a sector average that says nothing about any one contractor’s class or modifier.

Where this fits in the decision

For a Florida construction employer the decision is usually about the modifier and class codes first and the rest of the PEO bundle second. See how much a PEO costs for how fees are structured, PEO for manufacturers for the parallel plant-floor case, and PEO client service agreement review for the contract clauses (including who holds the policy and what happens on exit) to put to an attorney.

What we could not confirm

We could not reach ncci.com, so we did not read NCCI’s current Experience Rating Plan Manual, its Basic Manual, its master policy or multiple coordinated policy rules for NCCI states (Florida included), or its construction classification pages; the NCCI explanations here are from a 2021 NCCI booklet and 2018 form instructions read through hosted copies, and may predate later plan changes. We could not reach the Florida Legislature, Department of Financial Services or Division of Workers’ Compensation sites; statute text is from a republisher and the current official text should be checked. We did not obtain Florida’s class-code list, premium eligibility thresholds or a current state modifier. We found no neutral source for any percentage saving from a PEO, or for whether a given PEO carries, blends or replaces a client’s modifier. The Minnesota rule is a Minnesota rule. We did not research monopolistic-state fund rules or independent bureaus beyond the list above, and the BLS figure is from a tool summary. Nothing here applies to your policy until a licensed broker and an attorney have read it.