Safety Incentive Compensation

Safety Recognition Simple or Concurrent Safety Awards Tiered Safety Awards Safety Integrated with Traditional Compensation Safety Incentives... 

The description at the end of Chapter 1 makes it clear that not all human resource management (HRM) changes necessarily improve safety. HRM policies implemented to eliminate all cost sharing associated with injuries, while they do remove income risk for woikers, also lessen their safety incentive. An example would be policies that ensured that employees on workers compensation elaims made as much money as they would at work. Profit sharing, on the other hand, might increase employees safety awareness. In this ehapter, we review prior analyses of how various HRM practices affeet safety to get a better idea of whieh practices improve safety and which do not. 

In the previous chapter we numerically simulated employer and worker safety incentives and workers decisions to file WC claims. In our simulations doubling the WC income replacement rate from its recent historical level would reduce the injury rate by two percent while raising reported injuries by about 30 percent. Our numerical simulations illustrated that when WC benefits increase the actual rate of work-related injuries can fall while the application rate for workers compensation benefits rises. 

A typical relationship in states workers compensation insurance programs is that a 50 percent reduction in WC injury costs produces no change in WC costs for a firm with seven workers, a five percent reduction in the WC costs for a firm with 10 workers, a 17 percent reduction in the WC costs for a firm with 75 workers, a 36 percent decline for a firm with 750 workers, and a 50 percent (dollar-for-dollar) decline in WC costs for a firm with 1750 or more workers (Chelius and Smith, 1987). Premium changes also take four years to take full effect. Because small firms insurance prices do not fall much if they improve their safety small firms safety incentives under WC are limited, and small firms have little reason to contest the severity or genuineness of their workers WC claims. 

Unfortunately, where the compensation system fails to generate safety incentives it cannot be assumed that government intervention will necessarily be more effective. In fact, in the case of asbestos miners government inspectorates exhibited a total lack of... 

This system of work leads to a major disjunction between safety and compensation. At law, employers are responsible for compensation and must carry workers compensation insurance. Thus the subcontracting firms carry the main costs of workers compensation. However, the principal contractor exercises close control over the subcontractors and even over their employees. In these circumstances the law imposes the primary responsibility for the safety of these workers on the principal contractor. (Subcontractors are responsible at law only to the extent that they exercise real control over the work process.) The result of these arrangements is that compensation costs cannot provide safety incentives so far as project management is concerned. Insofar as the principal contractor is safety conscious this must be for reasons other than the costs of compensation. By way of qualification, it should be noted that some industry leaders are now employing a greater proportion of the workers on site directly. Where this happens the disjunction will be correspondingly blurred. 

Steelworkers has had only one compensation claim in nine years, a man who was off work for six months following a fall in which he broke his shoulder. But this apparently excellent record is deceptive. Robbie knows that claims are likely to increase his premium. He therefore engages in claims suppression. In particular, he avoids claims by getting liis men to take paid sick leave when they injure themselves. This means that there is no correlation between Robbie s compensation premium and the number of injuries his workers experience. There is thus no way that compensation costs can act as a safety incentive in Robbie s case. 

Fourth, although I have argued that in the case under discussion the economic costs of compensation are quite irrelevant, that is not to say that more general cost pressure is irrelevant. The power of the union movement in this industry stems ultimately from its ability to disrupt a building schedule which can be extremely costly to the principal contractor. In this sense cost pressures do provide a safety incentive. But these pressures do not exert themselves in any automatic way as the believers in market forces might like to think. They operate only because the unions are in a position to impose them should building firms slacken in their commitment to safety. 

The coal mining industry offers a useful illustration of the limitations of the view that safety pays —of the view that economic self-interest provides an effective incentive to companies to improve occupational health and safety. There are two strands to the safety pays argument. The most familiar is the notion that workers compensation costs provide significant safety incentives. In the first part of this chapter I shall explore in some detail the limitations of this notion in the context of coal mining and argue that safety in this industry depends as much or more on government intervention. 

Hopkins, A. (1994). The Impact of Workers Compensation Premium Incentives in Health and Safety. Journal of Occupational Health and Safety-Aust. NZ, 10(2), 129-36. 

Effective safety incentive compensation typically includes three elements ... 

To continue its growth, SYSCO has begun over twenty-five Get Better Initiatives in all areas of its business, including sales, marketing, supply chain, safety, diversity, margins, employee retention, incentive compensation, and others. 

Economic Incentives for Automation Projects Industrial applications of advanced process control strategies such as MPC are motivated by the need for improvements regarding safety, product quality, environmental standards, and economic operation of the process. One view of the economics incentives for advanced automation techniques is illustrated in Fig. 8-41. Distributed control systems (DCS) are widely used for data acquisition and conventional singleloop (PID) control. The addition of advanced regulatory control systems such as selective controls, gain scheduling, and time-delay compensation can provide benefits for a modest incremental cost. But... 

In addition, responsible parties—from the shop floor to the board of directors—should be rewarded for good process safety performance, and there should be consequences for poor performance. Linking process safety results with personnel compensation must be done carefully to avoid counterproductive incentives. The compensation systems must not discourage reporting unsafe conditions or other gaming of the metrics system. 

It would be useful to check these impressions against the official statistics on occupational risk collected by the Bureau of Labor Statistics (BLS), but these are notoriously unreliable. Indeed, the National Research Council, an offshoot of the National Academy of Sciences that reports on public policy issues, found the BLS data inadequate for monitoring the effectiveness of safety programs (Saddler, 1987). There are several problems. First, the data are collected as part of the Occupational Safety and Health Act (OSHA) reporting system, which subjects them to distorting incentive effects. Firms are required to maintain logs of fatal and nonfatal accidents, but they have an incentive to underreport this information since it could be used as evidence to support workers compensation or tort claims by workers, and because... 

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