Your workers' comp experience mod is the number that raises or lowers your premium based on your own injury claims. Joining a PEO does not erase your mod, and the PEO does not take it over. What happens to it depends on two things: how the PEO's workers' comp policy is written, and the rules of your state. If the PEO covers you under a policy in its own name, its mod usually applies to your workers while you are with it. When you leave, your own mod comes back, built from your claims during the PEO years if the PEO's insurance company reported them separately from its other clients' claims. If it did not, in most states the PEO's mod can follow you for up to three years.

A PEO, or professional employer organization, is a company that becomes a co-employer of your staff. It runs payroll and usually provides workers' comp coverage, while you still run the business. Our guide to PEO workers' compensation explains how that coverage works and what it costs. This article covers one narrower question: what happens to your mod on the way in and on the way out.

The short version

  • Your mod compares your injury claims with those of similar businesses. Below 1.00 lowers your premium. Above 1.00 raises it.
  • The rules that set your mod treat joining or leaving a PEO differently from selling your business, so your claims history is not wiped out or handed over.
  • If the PEO covers you under one big policy in its own name, the PEO's mod usually applies to your workers while you are with it. If you have a separate policy in your own name, your own mod applies. A few states always use your own mod.
  • When you leave, your mod is rebuilt from your own claims if the insurer kept them separate. If it did not, the PEO's mod can stay with you for up to three years. Texas has its own timing rules.
  • Before you sign, ask the PEO in writing which policy type it uses in your state and whether its insurer keeps your claims separate.

What an experience mod is

Workers' comp insurance pays medical bills and part of lost wages when an employee is hurt at work. In most states, the rating rules come from NCCI, the National Council on Compensation Insurance, a rating organization that collects claims data from insurers.

Your experience modification rate (EMR), usually called your mod, compares your claims with the average business in the same line of work. NCCI usually uses three years of payroll and claims. The most recent year is often left out because its data isn't ready yet. A mod of 1.00 is average. On NCCI's own example of a $100,000 premium, a 0.75 mod brings the bill to $75,000 and a 1.25 mod raises it to $125,000.

Not every business has a mod. You only get one once your premium passes a threshold your state sets. Below it, a neutral 1.00 applies. The paper that shows how your mod was calculated is called the experience rating worksheet. Some people call it an experience record.

Joining or leaving is not a change in ownership

When a business is sold or merged, NCCI's rating manual decides what happens to its mod. Those rules say when a buyer takes on the seller's claims history, and when two companies share a single mod.

Those rules leave PEOs out on purpose. The rulebook says outright that signing up with a PEO, or leaving one, is not a change in ownership. And two businesses are only combined into one mod when the same owners hold more than 50% of each. A PEO doesn't own your company, so the ownership rules never combine your mod with the PEO's.

So your history does not disappear when you join, and the PEO does not take it over. Separate PEO rules decide whose mod applies while you're there, state by state.

While you're with the PEO: whose mod applies

NCCI describes a few ways a PEO's workers' comp can be written. The type of policy decides whose mod is used.

  • One policy in the PEO's name. NCCI calls this a master policy. It covers the workers of many client companies under the PEO's name. The PEO's mod applies to everyone on it, including your workers. That mod reflects the claims of all its clients together.
  • A separate policy in your name. NCCI calls this a multiple coordinated policy. You get your own policy for the workers the PEO co-employs, and your own mod applies to it.
  • Your own coverage. In some states you can keep your own policy for all your workers while the PEO does everything else. Your mod applies, as it always did.

Which of these a PEO can use depends on your state. A PEO with a low mod can lower what you pay for workers' comp. A PEO with a high mod can raise it, even if your own record is clean.

Leaving a PEO: what happens to your experience mod

Under a separate policy in your name, nothing special happens. Your claims were always recorded under you, and your mod carries on.

Under a policy in the PEO's name, it depends on whether the insurer kept your claims apart from everyone else's.

Flowchart. If the policy was in your name, your own mod carries on when you leave. If it was in the PEO's name and your claims were kept separate, a new mod is built from your own claims. If they were not kept separate, the PEO's mod can apply for up to three years, until you qualify for your own.
What happens to your mod when you leave a PEO
  • If it did, the insurer sends NCCI your company's own payroll and claims from the PEO years. Your next mod is calculated from them, along with any claims from before you joined that still fall within the three years.
  • If it didn't, NCCI has nothing to build your mod from. In 28 of the 35 states we checked, the PEO's mod then applies to your new policy for up to three years. It stops sooner once you qualify for your own mod again.

While you're on a policy in the PEO's name, your claims are reported with everyone else's, so they also count toward the PEO's own mod. What happens to them there after you leave varies. In 18 of the 35 states, NCCI takes them back out once the insurer reports them. In 10, they stay in the PEO's mod until they are too old to count. That affects the PEO and its other clients more than it affects you.

Texas has its own timing

In Texas, you can either keep your own policy or be covered on the PEO's, under a 2013 change to the state's PEO law. Under the Texas version of NCCI's rating manual, if the PEO carries the coverage:

  • For your first two years with the PEO, your own most recent mod applies. If you had none, a neutral 1.00 applies.
  • After two years, the PEO's mod applies.
  • If you leave after more than two years, you get whichever is lower for one year: your mod from before you joined, or the PEO's mod when you leave.
  • If you leave in under two years, you get whichever is higher for one year: the mod you have now, or your last mod from before you joined.

After that year, your own current mod applies, or 1.00 if you don't have one.

State by state

We read NCCI's guide to PEO rules for each of the 35 states with a current version, all dated July 1, 2026. (NCCI's guides for the District of Columbia, Montana and Wisconsin are older, from 2015 to 2019, so we left them out. Pennsylvania is covered below.) The states fall into seven groups. Each state's guide is linked under Sources, so you can check any row yourself.

What happens to your experience mod in a PEO, by state (NCCI guides dated July 1, 2026)
GroupStatesWhile you're with the PEOWhen you leave
Claims taken back outAlabama, Alaska, Idaho, Indiana, Iowa, Kentucky, Maryland, Mississippi, New Hampshire, New Mexico, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, West VirginiaOn a policy in the PEO's name, the PEO's mod. On a separate policy in your name, yoursYour mod is built from your own claims if the insurer reports them, and they come out of the PEO's mod. If not, the PEO's mod for up to three years. In Indiana, Kentucky and New Mexico the insurer must report them. Kentucky requires the policy in the PEO's name
Taken out, with a stopgapArkansas, ColoradoSame as aboveThe PEO's mod is used at first. Once your own is calculated, it replaces the PEO's back to the day the policy started. If your claims can't be reported, the PEO's mod for up to three years. Your claims always come out of the PEO's mod
Claims stay in the PEO's modFlorida, Georgia, Illinois, Kansas, Maine, Missouri, Nebraska, Nevada, North Carolina, VirginiaSame as above. In Illinois, if your mod is at least 50% higher than the PEO's when you join, yours is used to price your workers for two yearsYour mod is built from your own claims if the insurer reports them. If not, the PEO's mod for up to three years. Your claims stay in the PEO's mod until they are too old to count
Your own mod throughoutArizona, Connecticut, Louisiana, OregonYour own mod. The insurer keeps a separate policy or record for your companyNothing special. Your claims were always kept under your company
PEO's mod, records kept by clientUtahOn a policy in the PEO's name, the PEO's modNothing special. The insurer reports each client's claims separately
No rules for regular insurersOklahomaNCCI has no rules here for policies from regular insurers. In the state's backup pool for hard-to-insure businesses, your own mod appliesNo special treatment
Time-based rulesTexasOn a policy in the PEO's name, your own last mod for two years, then the PEO'sThe lower or higher of your old mod and the PEO's for one year, depending on whether you stayed two years. See above

Rules change, so check the linked guide, or ask the PEO, before you rely on a row. This table is a guide, not legal advice.

States with their own rating bureaus

NCCI's rating plan does not apply in California, Delaware, Michigan, New Jersey, New York or Pennsylvania. Those states run their own rating bureaus with their own rules. Four states, North Dakota, Ohio, Washington and Wyoming, run state workers' comp funds with their own plans. In Indiana, Massachusetts and North Carolina, a state rating office calculates the mod for businesses that work only in that state, using NCCI's plan. The table rows for Indiana and North Carolina still apply. If you have staff in any of these states, ask the PEO how that state handles it.

A worked example

Example with made-up numbers, to show how it works:

A landscaping company in Alabama has a mod of 1.30 after a bad year. Its premium before the mod is $40,000, so it pays $52,000. It joins a PEO that covers it under one policy in the PEO's name. The PEO's mod, say 0.95, now applies to its workers. Three years later it leaves.

  • If the PEO's insurer kept the company's claims separate, the company's next mod is built from its own claims while it was with the PEO. Fewer claims would bring the mod down from 1.30. More claims would keep it high.
  • If the insurer did not keep the company's claims separate, the PEO's 0.95 can follow it for up to three years, until it qualifies for its own mod again.

None of this is a promise of savings. The mod is one part of the price. The rate for your type of work and the PEO's own fee matter too. Our guide to pay-as-you-go workers' comp explains how PEOs usually bill for it.

What to ask before you join, and before you leave

Get these answers in writing.

  • Which type of workers' comp policy covers my workers in each state where I have staff: one in your name, or one in mine?
  • Whose mod will apply to my workers, and what is that mod today?
  • Does your insurer keep my company's payroll and claims separate, and will it send them to NCCI when I leave?
  • Can I get a copy of my claims history, called loss runs, every year and when I leave?
  • Please keep a copy of my last experience rating worksheet from before I joined.

If you are thinking of ending the arrangement, our guide to leaving a PEO covers the rest of the move. If your business has a high mod today, our article on PEOs for high-risk industries covers what to expect.

Talking it through

Comparing how different PEOs would handle your mod takes some digging. If you'd like help, you can request a consultation, and we'll connect you with our independent broker. It typically takes several business days. The consultation is free to you. If you sign through the broker, he shares part of his fee with us.

Sources