The cost of Workers' Comp risk and how you mitigate it
Keeping employee’s safe is the right thing to do.
Consider this scenario.
Your company operates on a 10% annual margin. An incident occurs resulting in several injuries and subsequently your Experience Modification Rate (X-Mod) goes up above 125%. Subsequently, your Workers’ Compensation premium increases by $50,000 (estimated at $150,000 over the 3 years that these incidents will impact your X-mod).
Several concerns ripple out from this scenario:
Your X-Mod increases, which depending on your industry, can be a barrier to compete on new projects
Your X-Mod is now above 125%, landing you on Cal-OSHA’s High Hazard Employer Program, from which you can expect a letter requesting information as to why your X-mod is above 125% and potentially an inspection from Cal-OSHA Consultation (and if you’re not judicious with your response a visit from Cal-OSHA Enforcement)
Your Workers’ Compensation premium has now increased by $50K, which means on a 10% margin you’ll need to increase sales by $500,000 (and maintain that level over the course of the next 3 years that the incident is impacting your X-Mod), or cut internal costs through other measures
Yet, while safety is top of mind for most employers, it typically takes a backseat to production and sales. Completely understandable because without products and sales the business and its benefits simply cease to exist. However, what should be considered in your strategic planning is the cost of risk.
In our experience, employers contact us after the incident, after the increase in their X-mod and after their workers’ comp premium skyrockets…. essentially after it is too late.
There is no remedy for time once an incident occurs. On the human side, it takes time to heal, not only the physical scars but the emotional ones that have reverberated across the organization. From the financial side, the cost and impact will be felt for years in both direct and in-direct costs, notably your Workers’ Compensation premiums. And, on the Compliance side, your organization can be subject to additional penalties, fines and in “Serious” incidents potential criminal penalties.
Digressing to pre-incident, when developing a risk management strategy, the question for many employers is, “Where do I begin?” This has been the common question – and problem - that we have been solving at ESM for over a decade.
Having developed hundreds of tools and best practices to guide employers in building, implementing and managing their Workers’ Compensation risk management program, we have productized the solution to provide an out-of-the-box Risk Management Program.
Our proprietary program provides employers with the solution to managing each side on the respective risk triangle. We have designed this program to provide employers with the tools to mitigate risk via Safety Management, Workers’ Compensation Claims Management, Return To Work and regulatory Compliance requirements.
Understanding that employers are at various levels in their Risk Maturity, we have created a tiered product system to support all or just some of an employer’s needs. Please click below for more information on each tier or Contact Us to discuss your Risk Management needs.
