Workers Compensation & Workplace Safety: Making Dollars & Sense Of It
In the second of a two-part series on speaking the language of company leadership to leverage safety efforts, HSI’s Chief Safety Officer, Jill James, fills us in on how to communicate the impact of workplace safety on workers compensation costs.
Safety in Savannah
Magnolia leaves, beautiful city squares and pralines. Considering I’m from the mid-west where nothing is green or fresh in February, I eagerly accepted an opportunity to address business executives at their trade association conference in Georgia.
One of the breakout sessions was on workplace safety. Imagine the rush to the room! Personally, I think many executives attended the session because they needed to get some actual work done back home, and this was the room to coast along unnoticed. Most everyone had laptops open working on different things, and I was 4th in line to speak. My topic? The Evolution of Safety Training, which took participants on a journey over the past 45 years.
The safety professionals speaking before me talked about JHA’s (Job Hazard Analysis), incentive programs, injury reporting and the importance of safety culture. Good, solid, topics delivered by educated, well-informed professionals. Laptops stayed open, typing continued.
It was my turn.
Time to experiment.
Time to go rogue.
Time to test out what I intended to address in my March blog anyway.
“Who wants to save money on this whole topic of safety?” I began.
Eyes lifted from the screens. So, I continued.
“I have a prepared presentation for you, which I intend to share, however I want to talk with you about money first.”
“We just heard solid safety practices from the other speakers, and implementing those and other practices saves money; let me give you an example.”
Since they were still listening, I kept talking. I told this true story.
There was a company who had been spending $1.2—$1.4 million dollars each year on workers compensation costs, over a number of years. By encouraging injury reporting early and for all injuries (while less severe and less costly); by implementing a return-to-work program, and by starting an earnest safety training program, we reduced the workers compensation costs to $850,000 in one year.
They were still listening and now taking notes. Cool. Know your audience; executives don’t know safety lingo because they don’t have to (you do/I do). However, they do know operating expenses.
The next question, perfectly placed, came from the audience: “How do I find out what my workers compensation costs are?” Other heads in the room nodded in agreement.
If you ever wished to ride into an executive meeting on a white steed, carrying data, with graphs and pie charts, and captivating your audience, this is your chance.
If you already do this, congratulations! You fully understand the benefit, and may be managing claims or working closely with the person(s) who do/does.
If I am speaking incomprehensively, I invite you to keep reading!
Here’s the skinny on workers compensation:
Employers are either Insured or Self-Insured for workers compensation.
Hold on—let me clarify two things quickly . . .
There are variations (such as monopolistic insurance states) and nuances within these two categories. However, those are two major category terms you need to know. Insured or Self-Insured.
If you hear someone say, “Workman’s Compensation” they are operating in another century. Just sayin’.
Being Insured for workers compensation means your company pays a premium for insurance like you do for your auto insurance. If you are a 16-year-old boy driving a sports car, the auto insurance premium will be higher than if you are middle-aged and driving a sedan. Same is true for your workers compensation premium. It’s based on what sort of “risk” your company is associated with, and determined by a number of factors, including similar industry history, your specific history (usually 3 years) your safety training program, and written program documentation, among other things. This risk is called your, “Experience”. That experience is given a numeric rating called, an Experience Modifier or EM. If your Experience Modifier or EM is 1.0 it means you are paying the average premium amount compared to companies with a similar level of risk. If your EM is .5 you are paying less than average, and you can do a happy dance! If your EM is over 1.0, then, well, you have some work ahead of you to start saving money. Your EM is assigned annually. You can ask your insurance company directly what your EM is or try your CFO, or whoever works with your insurance lines and agreements. They will likely have the letter noting the current EM.
Employers who are insured have most aspects of an injury or illness claim managed by a claims specialist with your insurance company, leaving the employer with little involvement in the process.
Being Self-Insured for workers compensation means you do not pay a premium. You pay all the real costs for an injury or illness including lost-wages. Basically, any expense associated with restoring someone to their maximum medical improvement (another insurance term). Many self-insured employers will have a workers compensation insurance carrier’s Self-Insured department manage aspects of a claim, including mandatory government filing. The employer pays the insurance company an administrative fee per claim for this work. Employers who are self-insured determine the level of involvement they want in managing a claim; in fact, companies with the infrastructure to handle it will manage all details without any administrative insurance help.
Here are three things you can do today:
- Find out if you are insured or self-insured.
- Then, ask for the name of your associated insurance carrier. (The only time you wouldn’t have one, is if you are self-insured and manage all aspects of claims within your company)
- Next, ask for the contact info of the insurance person assigned to work with your company. Usually, it’s a team with one lead.
Back to the white steed and the bundle of data under your arm . . . here is what you can ask for and present to your executives once you’ve contacted the insurance person/company keeping your data.
Your current Experience Modification (EM) rate.
The cost of that rate (premium cost)
Your EM history. I’d ask for 3-5 years for trending.
Ask your CFO/Accounting Department what the company has spent on Workers Compensation costs for each of the past 3-5 years, including any administrative fees.
Regardless of how you are insured you can ask your insurance company for data such as:
- Most costly type of injuries
- Most frequent type of injuries
- Body part most affected
- Average age of injured employee
- Day of week with most injuries and/or time of day
- Dollars spent on lost wages coverage
- Average cost of injury
- Active legal cases and status
The data and questions you could ask for are endless. Consider your audience and ask for information that will help you tell a story linking dollars with your safety objectives be succinct and make it repeatable. If you could present this same data quarterly or annually, which data would you present? If you want, you can ask your insurance company representative to present the data for you.
Let’s say you get all this data and it looks really terrible, and is sort of shocking and you start to panic about how affective you are at your job—then what?
Embrace it! It only gives you more power.
Now that you and your executives know what the cost of safety or lack thereof looks like on the bottom line, you can have a conversation. You can ask for help. You can push for improvements. You can help narrow the focus. You can now talk about safety culture, and why managers need to be involved with safety, and why you can’t be on this ‘safety island’, solo.
Let’s say you have been pushing for mandatory use of safety glasses and you are hitting a brick wall. Look at your data. Are you having injuries, and, if so, what’s the cost? If the answer is no, move on to what is driving costs. Maybe it’s incredibly expensive back injuries, all in one department, where you have been begging for dollars to do an ergonomic redesign. I am not saying that safety glasses aren’t important; I am saying pick your battles and be laser focused with your requests and recommendations. Your executives will appreciate your analysis.
What if you have been pushing for training on a specific topic like forklift operation or ergonomics and you can link injuries to lack of training? Consider how powerful dollars linked to injuries can be in support of your mission.
As for Savannah, people kept taking notes. We had a rich conversation about safety, money and training. I’ve had follow-up questions from participants and none of them had to do with southern grits or the beauty of magnolia trees, they were safety questions. Imagine that!
Learn more about safety training online.