How does payroll relate to workers compensation losses? This has long been a foundational question for the industry, and one that continues to evolve as wage levels, job roles, and workplace dynamics change. NCCI’s last exposure base review (2006) concluded that “total payroll as an exposure base is an appropriate reflection of loss potential for all classes and for each industry group.”

This newest 2026 NCCI paper on this topic examines how claim frequency and severity vary across wage tiers and what those patterns mean for how payroll aligns with expected losses. The headline is consistent with NCCI’s previous research:​ payroll continues to function effectively as an exposure base because of its practicality, transparency, and consistent application across a wide range of employers.

At the same time, this paper shows that payroll’s relationship to aggregate loss experience is not consistently uniform across all wage levels and presents objective patterns in how loss dynamics change across wage tiers.

Key Insights of the New 2026 Report:

– – Although alternatives exist, unlimited payroll remains a practical, reliable, and broadly applicable workers compensation exposure base
– – Indemnity severity generally rises with wages but plateaus at higher wage levels, while medical severity increases more consistently across all levels
– – Claim frequency typically declines as individual wages increase, contributing to variability in the proportionality between benefits and wages

Payroll has consistently been considered a reliable foundation for ratemaking. This research highlights how that foundation performs under different conditions, particularly at higher wage levels, where factors such as statutory benefit limits and changing claim dynamics come into play. These findings build on that long-standing understanding, offering additional clarity rather than redefining it.

This is not a new question, but it is one to be revisited as the system evolves. As part of NCCI’s ongoing commitment to supporting a healthy workers compensation system, we regularly re-evaluate the methodologies that underpin pricing and risk assessment. This analysis reflects NCCI’s continued effort, reinforcing confidence in our current approach, while providing insights that may help inform future decisions.

Unlimited payroll has served as the industry’s standard exposure base for decades, though it’s not without limitations. It reasonably captures the relationship between wages and claim severity but does not consistently reflect differences in claim frequency across wage levels. As a result, aggregate loss ratios generally decline as wages increase, driven by lower frequency and compounded by capped indemnity severity.

NCCI will continue to monitor industry trends and update this analysis as appropriate. To explore the full findings and analysis, read the complete report.