Workers Compensation is a government mandated benefit for employees who suffer a work-related injury or illness. Say what you want about government-mandated anything, according to people in the know about such things, the system in place today is much better than the way things used to be!
According to the Society for Human Resource Managers (SHRM), in 1908, the United States federal government enacted the first workers comp system for its employees – the Federal Employers’ Liability Act – as a replacement for the English common law system, which assigned liability for work-related injuries on a case-by-case basis and offered little or no right to compensation for work-related injuries. Lawsuits could be complex and the results harsh, and employers often faced multiple, costly lawsuits arising out of the same sort of injuries. It was a system that failed both parties.
Individual states quickly followed the federal government by introducing their own rules and, today, it’s Workers Comp is really a complex series of rules for private employers. Though it can be frustrating for both employees and employers, says the SHRM, it has proved to be a great improvement.
“Each state governs itself with regard to workers comp – most states require workers comp to be purchased if you have employees,” explains Bryan Schauer, CPCU, VP at the Schauer Group Insurance in Broadview Heights, OH. “The coverage forms are pretty consistent unless you’re doing something outside the norm – there are federal standards for certain occupations like longshoremen or nuclear workers.”
Understanding what constitutes an “employer,” an “employee” and how workers comp relates to other workplace laws can be confusing. The charts that accompany this article illustrate just how different the state requirements are. For this reason, Schauer says, the relationship with an insurance agent – not just premium price – shouldn’t be overlooked.
“Most states use the National Council on Compensation Insurance (NCCI) experience modifier to determine workers comp premiums,” he explains. “This aggregates a bunch of payroll information and claims history and will assign the ‘average loss per payroll amount.’ Each year that experience modifier can be applied to your rate and you could be above or below average.”
That modifier is not dictated by the insurance carrier – and both Schauer and the SHRM say a solid relationship with your insurance carrier can help keep your costs down. Don’t switch just to save money.
“It’s not really just an expense,” Schauer says. “Loss prevention can actually be looked at as an investment.”
Workers comp is more than a necessary expense; it is a controllable aspect of business that, if managed properly, will have a measurable and positive return on investment (ROI). Employers should also recognize that workers comp costs include indirect costs of administration, production delays, unhappy customers, increased stress and so on. Accordingly, it may be a big mistake to shop for a workers comp carrier based solely on price, because having an agent and carrier with a good understanding of workers comp is very important.
“Being proactive with safety can cost you some money up front, but in the end it can save you tons,” says Tyler Curren, HR manager with LKQ Remanufacturing in Grand Prairie, TX. “And the first steps business owners should take are to examine their shop layout and address employee training.”
On a daily basis, employees narrowly avoid incidents that could result in a serious injury. For example, a forklift operator is stacking a high load, the load shifts forward and crashes to the ground. No one is injured, but the product on the pallet is damaged. When such incidents take place on the job, it can serve as a warning that serious accidents are just waiting to happen.
A near miss is an unplanned event that did not result in injury, illness or damage, but had the potential to do so. Only a fortunate break in the chain of events prevented an injury, fatality or damage. A faulty process or management system could be the root cause for increased risks that lead to those near misses and should be the focus of improvement.
Near miss incidents often precede loss-producing events, but may be overlooked as there was no harm, no injury, damage or loss. History has shown most loss-producing events (incidents), both serious and catastrophic, were preceded by warnings or near-miss incidents. Recognizing and properly reporting near-miss incidents can signifcantly improve a worker’s safety and enhance an organization’s safety culture.
Setting up a successful safety management program to ensure the near misses are properly reported and investigated is an important step in reducing occurrences of serious incidents.
“Granted, proactive safety can add up over time,” admits Curren. “A forklift driver spending 10 minutes a day inspecting his equipment may not technically be doing what we’re paying him to do – move parts and product around the shop – but if that inspection prevents something bad from happening, it will save so much more in other costs.”
Establishing a culture of safety must start at the management level, Curren says. “The ones who are in a position to create and enforce the rules must be the first ones to follow them. Management can’t just talk the talk – they need to walk the walk.”
Training employees to not only recognize but also report potential safety hazards can help reduce the frequency and severity of injury claims. Schauer suggests looking at your shop’s historical claims data to determine areas of improvement.
Are you facing back strains or foot injuries? Maybe the problem is with ergonomics – look at whether employees need to be trained in safe and proper lifting procedures. Hearing or eye injuries? Is proper safety equipment being provided and used? Are there frequent slips and falls? Check the work environment for clean floors and employees for proper footwear.
There’s nothing simple about workers comp, and for small engine builders without full-time HR departments, keeping up may seem like an impossible, expensive task. The failure to do so, however, can be much more costly.