Safety performance workers compensation costs

Harshbarger, D., Rose, T. (1991). New possibilities in safety performance and the control of workers compensation costs. Journal of Occupational Rehabilitation, 1, 133-143. 

Later, while researching for Chapter 24, Measurement of Safety Performance, I observed that companies with superior OSHA rates also had lower workers compensation costs than did other companies. I then wanted to determine whether the quality of investigation of hazards-related incidents would also be superior. (For this second study, it must also be said that the methodology used would not stand the test of good science.)... 

But, using workers compensation costs per hour won t get much attention in a company in which the culture has required and achieved exceptionally good safety performance. For a company that has operations the public would consider high hazard, the annual workers compensation cost per employee has recently ranged a bit plus or minus of 100. That computes at 0.05 per hour. A 20% reduction nets the employer 0.01 per hour, or 20 per employee per year. Not very impressive. 

Trailing indicators are the traditional metrics that measure past safety efforts (Dupont Corporation 2000). When using trailing indicators, data is collected after the fact (after a number of accidents or illnesses, after two years of workers compensation, etc.). Trailing indicators provide an organization with feedback in terms of how good performance has been over a period of time. Examples of trailing indicators include accident records, loss reports, injury and illness statistics, injury costs, and workers compensation costs. 

Other reports may inclnde absenteeism, department compensation costs, etc. These reports will permit performance ratios to be developed to monitor efficiency - for example, the ratios of workers compensation costs to the total wages bill. Uninsured cost calculations for accidents allow the effect of accidents on profitability to be demonstrated. This can assist in seeking allocations for health and safety initiatives. 

Superior Safety Performance A Reflection of an Organization s Culture Many large organizations have achieved and maintained superior safety results as evidenced by their best-in-class Occupational Safety and Health Administration (OSHA) incident rates and by exceptionally low worker compensation costs. This chapter provides a composite review of the safety... 

Common measures for a safety program s performance are insurance expenses and losses. A cost that is often tracked by safety professionals is the organization s worker compensation premiums. Workers compensation premiums can be calculated in a number of different ways. However, regardless of the method for determining premiums, they provide an excellent indicator for safety performance in the workplace. 

Organizations nsnally keep a variety of records which docnment operating and capital costs. These records assist the organization in determining the efficiencies and effectiveness of their bnsiness sections. They also assist with determining budget planning A portion of these records may involve costs associated with occupational health and safety. The costs of various elements of loss control-for example, security, workers compensation or fire - can be broken down for each centre or department to assess performance. 

Now, do some wild speculation and consider whether the following example begins to have credibility. An employer has 500 employees who work I million hours a year. Do the OSHA statistics, the recordable case rate and the lost-workday case rate, for an exposure of I million hours begin to achieve a reasonable confidence level as measures of the quality of safety performance Perhaps somewhat, but additional performance measures are needed. An entity of this size would more than likely purchase workers compensation insurance. Cost trending and the trending of the company s experience modification rate serve as additional measures. 

Hospitals should look beyond the direct outcomes of accident prevention and ask What is the relationship between safety and other performance metrics in this organization Resources not consumed in worker compensation claims or treating avoidable patient complications can be redeployed to meet core organizational goals. Improved patient safety performance increases the efficiency of intensive care unit (ICU) bed use and increases throughput. Safe and reliable care lowers costs to payers and potentially increases market share. Effective patient safety practices increase staff loyalty, decrease staff turnover, and reduce associated hiring and training costs. 

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