What are NAICS Codes?
Since 1997, the North American Industry Classification System (NAICS), pronounced “Nakes,” has been a collaboration between the United States, Mexico, and Canada to provide statistical comparability amongst North American industries. It is a system that is updated every five years and is designed to group North American industries based on their primary activities, processes, and materials used. Entities that have similar processes and use similar materials in similar ways are grouped together.
NAICS Code Format
NAICS codes start with a 2-digit code that specifies a certain economic sector. As more numbers are added, the more specific the code becomes. NAICS codes are generally only used to the 5th digit, while the 6th digit is just an added level of specificity. See an example below:
- 33: Economic Sector – Manufacturing
- 331: Subsector – Primary Metal Manufacturing
- 3315: Industry Group – Foundries
- 33152: NAICS Industry – Nonferrous Metal Foundries
- 331524: National Industry: Aluminum Foundries (except Die-Casting)
How do you determine your NAICS code?
If you aren’t sure what your current NAICS code is, you can either look at your OSHA 300A form or use the United States Census Bureau’s NAICS Search Tool. Here, you can either enter a keyword search or select your economic sector and then scroll down to your specific NAIC industry. Be sure to select the year range you are looking for, as the codes are updated every five years and may change over time.
How can NAICS codes be used?
Once you determine your NAICS code, you can then use it in several beneficial ways. The Occupational Safety and Health Administration (OSHA) uses NAICS codes for their Site-Specific Targeting (SST) and Emphasis (Federal and Regional) programs. OSHA’s SST program uses the Days Away, Restricted, or Transferred (DART) rates to target those companies that have higher DART Rates in comparison to others in their NAICS industry, whereas the emphasis programs focus on specific hazards and high-hazard industries. You can use their data to determine if you may be at a higher risk for an inspection, along with a list of the most commonly cited standards for your industry. Using that information can be helpful when trying to prioritize safety and compliance needs.
DART Rate Benchmarking
Before being able to see how your facility compares to others in your industry, you must calculate your DART rate from the previous year. Below is the formula to calculate your DART rate.
Once you know your DART rate, you can use it to find benchmark data for your NAICS code. One method is by using the U.S. Bureau of Labor Statistics Site, the NSC Benchmarking Tool, or one of the several other benchmarking tools available online. These tools will allow you to see how your facility compares to other companies in your industry. If you have a higher-than-average DART rate, then an increased chance of an OSHA inspection is possible. Also, you may need to re-evaluate the effectiveness of your current safety program and see what can be done to lower your rate for current and future years.
OSHA Citations issued by NAICS Code
Another use for NAICS codes is helping to determine the most commonly cited OSHA standards for your industry. OSHA’s website has a page dedicated to frequently cited standards (Federal or State) by industry NAICS code that can be found here.
You can filter the search by the NAICS code, the number of employees, and by either a Federal or a State-run program.
Once you submit your preferences and NAICS code, you will see a table that ranks the most commonly cited standards for your industry.
The search results will show you the standards, the number of citations for each standard, and the penalties issued. You can look at the top standards cited and then compare them to your overall safety program. Knowing the top standards cited in your industry will help you better prioritize safety and compliance goals and efforts. For example, if you know that your Lockout/Tagout program needs improvement and that Lockout/Tagout is the most commonly cited standard in your industry, this should now become a priority issue. Also, if you are struggling to get buy-in or approval for your safety program and/or budget, you can use this information to substantiate budgeting requests, as well as to inform or convince decision-makers into taking action.
As an example, using the search results from above, the average per citation penalty for violations related to Lockout/Tagout standards from October 2021 to September 2022 is $19,065.
Summary
NAICS codes can be a helpful tool to improve your safety focus by determining the effectiveness of your safety program by comparing your company to others in your industry. They’re also helpful in knowing if your code is being targeted by OSHA or knowing which standards OSHA is commonly enforcing. Using that information can certainly be beneficial in prioritizing and improving your current and future safety efforts.
If you need additional guidance about working with NAICS codes, contact U.S. Compliance for assistance searching, analyzing, or improving your facility’s safety needs.
