Staffing Agency Workers' Comp: Codes, Mod, Audits

A staffing agency pays workers' compensation on two very different payrolls: its own office and recruiting staff, and the workers it places at client sites. The insurer assigns a class code to each. In states that use the National Council on Compensation Insurance (NCCI), the temporary staffing rules sit in an access-controlled manual, and some states use their own class systems, so the dependable first step is to get the carrier's classification in writing and check it against your actual assignments. This guide is for the buyer of a temporary staffing agency who wants to understand the class codes, the experience mod (a multiplier built from the seller's past claims) and the payroll audit before the first audit bill arrives.

The short answer

Class codes mostly describe the employer's business in a state, with standard exceptions (clerical office, outside sales) that depend on an employee's duties. How the rules apply to placed workers is the carrier's call. Codes, rules and rating bureaus vary by state.
The seller's mod generally follows you (NCCI rules do not drop experience for temporary staffing agencies). In NCCI states, report the ownership change to your insurer within 90 days.
The policy premium is an estimate. An audit can run up to three years after the policy ends, and it can move payroll into a different class and add premium.
Placed workers' injuries may be recorded on the client's safety log, but your comp claims land on your policy and your mod no matter who records them.

What are the two payrolls at a staffing agency?

A temporary staffing agency is generally the employer of record for the workers it places, so its comp policy covers their wages, often a much larger payroll than its own office staff. Confirm your model with deal counsel, since placement-only and professional employer organization arrangements differ. Premium is a state-approved rate per $100 of payroll for each class, times the payroll in that class, adjusted by the experience mod. The table shows how to think about each group. It does not assign codes, because the insurer decides and bureaus differ.

Staffing agency payroll groups and the classification questions to ask
Payroll group	What they do	Classification question	What to ask the carrier
Placed workers at client sites	Warehouse, assembly, packing, office support, trades, health care or professional work under the client's supervision	Which class or classes does the carrier assign to this payroll?	The class or classes the carrier assigns to this payroll, in writing, with the manual rule it relies on (including whether placed workers follow the agency's own business or each client's operations)
Recruiters and branch staff	Interview, screen, fill orders, mostly in an office	Does the clerical office exception fit?	Whether the office is physically separated and whether any duties disqualify it
Account or sales staff	Visit clients, some driving	Does the outside salesperson exception fit?	How the carrier treats staff who also work in the office
Drivers who move workers	Carry workers between sites in company vans	Is a driver class, or the governing class, used?	Where the payroll of an agency's own drivers is assigned

Read the plain definition at workers' comp class code and the library guide to staffing agency workers' compensation.

Which class code applies to placed temporary workers?

The answer depends on your state, your rating bureau and the carrier's classification, and it is not something a public article can settle for you. In NCCI states the temporary staffing rules sit in NCCI's access-controlled manual, so ask your carrier which rule and class it applied. Pennsylvania, Delaware and California use their own classification systems, so NCCI material does not carry over directly. Check the bureau's own manual.

Three rules trip up new owners. Code numbers are from the Massachusetts bureau's manual, so confirm yours.

Office staff. The clerical office exception (8810) needs an office physically separated from other work areas and hazards, and it excludes outside sales.
Salespeople and drivers. Outside sales (8742) and commercial drivers (7380) have their own limits.
Mixed duties. When one person also does other work, the payroll generally goes to the highest-rated class involved. Some manuals allow a split between two ordinary classes only when records show actual time and pay in each, never by estimate, and pay in the standard exception classes generally cannot be split that way.

Ask your carrier how it treats your recruiters and account managers, since that depends on their duties and the carrier.

A hypothetical example. At audit, the carrier finds that 40 placed warehouse workers were reported under a class the carrier later says does not describe their work. Their payroll was $1 million over the audit period, or 10,000 units of $100. The carrier re-rates those units at the rate for the class it now says applies. If that rate is $5 per $100 higher (an illustrative number, not a real rate), the additional premium is 10,000 times $5, or $50,000, added by endorsement after the work is done. In a stock deal that bill lands on the company you own. Questions to settle before closing: what did the carrier assign, how much payroll is involved, and does the purchase agreement say who pays an audit bill for periods before closing? See how class codes get corrected.

Will the seller's claims history follow me (the experience mod)?

The experience mod is a multiplier on your workers' comp premium built from the claims record of the business, where 1.00 is average and a number above 1.00 raises premium. Usually the seller's record follows you, and for a staffing agency that is the rule. Under NCCI rules in effect from July 1, 2025, a change of ownership includes buying the stock, buying the assets and continuing operations, and forming a successor entity. An asset purchase into a brand new company does not reset you to 1.00. For temporary staffing agencies, NCCI rules do not drop the seller's experience after an ownership change. The rating organization can also adjust experience to stop evasion, so expect the seller's mod to follow you. Independent bureau states differ. California's rating bureau applies its own ownership rules, so ask your carrier how a change is treated there.

In NCCI states and several others, the policy requires you to report the change to the insurer within 90 days, so check your policy and state. In NCCI states you report the change on NCCI's ownership information form, through its online tool or by a signed letter on company letterhead, and your carrier can usually help you send it. The rating bureau, not the carrier, decides what the change does to the mod. In NCCI states, a recalculated mod applies back to the date of the change, up or down, and failure to report can be treated as possible evasion. Independent bureau states time this differently. Under NCCI rules, businesses with more than 50 percent common ownership combine into one mod, which matters if you add a second agency. See reviewing an experience mod for errors and the definition of experience modification rate.

How do payroll estimates and audits work when headcount swings weekly?

The premium on the policy is an estimate. After the policy ends, the insurer sets the final premium from actual payroll and the correct classes, and you pay a balance or receive a refund. The insurer can audit during the policy and for up to three years after it ends. The premium base includes pay to your employees and also to other people engaged in work that could make the insurer liable, which is how uninsured subcontractors get added.

Staffing payroll moves with client demand, so an estimate built from a slow quarter can produce a large audit bill, while one built from a peak can tie up cash. Keep payroll registers by assignment, client and state, reconcile them to your tax filings and bring them to the audit. Who owes an audit balance depends on structure: in a stock deal the acquired company is the insured and can be billed for pre-closing payroll, while in an asset deal the balance is normally the seller's on its own policy and the purchase agreement decides who bears it, though state successor rules (below) can still reach a buyer. Pay-as-you-go billing charges each payroll cycle from actual data but does not remove the audit, and how it carries over at a sale depends on the carrier and the payroll provider. Read payroll estimates and audit bills and pay-as-you-go workers' comp.

If you want a second set of eyes on the carrier's class letter before the first audit, a Morrow review can compare it with your payroll registers. It is a review, not coverage, and any new terms depend on carrier underwriting.

Who records a placed worker's injury, and does that change my mod?

No. Your comp claims land on your policy and your mod whoever records the case. The recordkeeping rule only affects the published injury rate. The federal Occupational Safety and Health Administration (OSHA) rule says an employer must record injuries of workers it supervises day to day, including workers from a temporary help service, so when a client supervises, the client may be the one that records the case. The Bureau of Labor Statistics (BLS) 2024 table shows a recordable case rate of 0.7 per 100 full-time workers for temporary help services, against 2.3 for all private industry. Because the rule can put a placed worker's injury on the client's log, and the table does not show whose workers are counted in which row, treat the figure as context, not as a measure of safety. See return to work and claim cost control and, for how injury rates feed pricing, what drives insurance cost for a staffing agency.

Do state rules or a PEO change any of this?

State funds. If you place workers in North Dakota, Ohio, Washington or Wyoming, workers' comp comes through the state fund (who must be covered varies, and Wyoming's scope has its own rules), which generally excludes employers liability, so employers add stop gap coverage. In those states you have no private carrier choice.
Ohio and Washington successors. Ohio's bureau can transfer a predecessor's rights and obligations to a successor. In Washington, a buyer can become liable for the seller's unpaid comp amounts unless it gives the department written notice and no assessment follows within 180 days.
California. A client employer can share liability with a labor contractor for failing to secure comp coverage, which is one reason a client may ask to see your coverage. The statute has size exceptions, so ask counsel how it applies to you.
Professional employer organizations (PEOs). If the seller used a PEO for its own office staff or for workers, then in an asset purchase that coverage does not automatically extend to your new entity. Read PEO or your own workers' comp and keep staffing and PEO models apart, because who is the employer differs.
Owner coverage and 1099 workers. Whether an owner may be excluded varies by state, and your own status as an owner is one of the items to settle in the first weeks; see the new owner workers' comp review. A recruiter paid on a 1099 can be pulled into the audit. See 1099 contractors and the audit.

For the full policy stack see what insurance a new staffing agency owner needs.

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Frequently asked questions

Which workers' comp class code applies to a staffing agency?

It depends on the state, the rating bureau and the carrier's classification of the work, and some states have their own systems. Ask your carrier for the classification in writing, and which manual rule it relied on.

Can I put my recruiters in the clerical class?

Only if their duties and workspace meet the rule. The clerical office exception generally requires physical separation from other work areas and hazards, and mixed duties can move payroll to the highest-rated class. The insurer decides.

Does buying the agency through a new company reset my mod?

Generally not. In NCCI states an asset purchase into a new company is still an ownership change, and NCCI rules do not drop the seller's experience for temporary staffing agencies. Report the change to your insurer within 90 days.

Who pays a workers' comp audit bill after I buy?

The named insured owes the balance on its policy. In a stock deal that is the acquired company. In an asset deal it is normally the seller on the seller's policy, and the purchase agreement decides who bears it. State successor rules, such as Ohio's and Washington's, can still reach a buyer in an asset deal, so ask deal counsel and the state fund before closing.

Does my PEO's policy cover me after I buy?

Not automatically. A PEO's coverage for the seller's workforce does not automatically extend to your new entity, so check the PEO agreement and have your own agreement or policy in place at closing.

References

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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

Workers' Comp, Payroll and Class Codes for a Staffing Agency