In an attempt to lower workers’ compensation insurance costs, some companies implement safety incentive programs. For example, everyone receives a $25 gift card if there are no injuries reported for thirty days. This type of incentive program is called a “results-based” program, and at least on paper, makes perfect sense.

According to one study, between 1991 and 2001, companies with a safety incentive program saw a 44.16% reduction in the mean lost-time workday injury rate.

Again, this makes perfect sense; a safer workplace means fewer injuries and lower WC costs, so a company with no reported injuries for thirty days is a safer workplace, right? Maybe. The biggest flaw found in a results-based incentive program is that it can encourage underreporting.

A 2010 survey conducted by the Government Accountability Office, found that approximately 75% of manufacturers in the US had safety incentive programs that could potentially affect workers’ reporting of injuries and illnesses.

Let’s say on day twenty Joe Smith incurs an injury, but he doesn’t want to blow the $25 gift card for all of his coworkers, so he decides (or is pressured by coworkers) to wait to report the incident. When he does finally report that injury ten days later, there could be complications resulting in a more severe injury and higher medical costs.

Plus, if the injury is caused by an unsafe situation, another employee could be injured before the initial injury is reported and the hazardous situation remedied. Either way, you’re looking at higher medical costs and higher workers’ compensation costs.

That doesn’t mean that safety incentive programs don’t work. They can motivate employees to pay attention to safety and to work more safely, but they have to be done correctly. If the incentive program focuses on the incentive and not actual safety, it can interfere with creating a safer work environment.

Here are six tips to help you create an effective safety incentive program to help lower your workers’ compensation costs:

An Incentive Program Has to Be Part of a Comprehensive Safety Program

Some companies try to create an incentive program without having a comprehensive safety program – including safety training, accident investigations, a return-to-work program, etc. - in place. An incentive program is a way to encourage employees to engage in a company’s safety program and safe actions that it creates. 

Consider “Process-Based” Incentives

As discussed earlier, a results-based incentive program can result in unreported injuries, which is not reducing accidents or injuries. Instead of rewarding employees for the number of days without an incident, try rewarding positive, proactive behavior such as attending safety meetings, wearing PPE, scoring well on a safety training quiz, or suggesting ways to create a safer workplace. 

Provide Genuine and Meaningful Incentives

You need to find out what motivates your employees, and you need to offer a meaningful incentive that is worth achieving. Not everyone is motivated by money. Some would rather be recognized for doing a good job.

Incentives can include a pizza party or exclusive T-shirts with the company logo or an annual recognition dinner where employees on every level mingle, and top management presents awards to employees who have practiced safe work practices.

Award Incentives Often and to Many Employees

Workplace safety is a year-round activity. If you only award employees once a year, it’s easy to forget about safety three or four months into a program. Instead, offer frequent rewards – quarterly, monthly, or even weekly.

Everybody wins when you offer a safe work environment, so your incentive programs should take that same approach and award everyone – from top management to individual employees and from employees who already work safely to those who need encouragement to work more safely.

Get Buy-In From Upper Management

Upper management is footing the bill, so they need to understand the goals of the program and how it will progress. It takes a while to see a decrease in injuries and the resulting lower WC costs. 

Plus, there is usually an upfront investment required for things like signs, results boards, and even time. As the program progresses and employees become more familiar with the program, those costs typically decrease.

But if upper management doesn’t see immediate results, they could withdraw their support if they don’t understand the process.

And in order to create a culture of safety, upper management needs to buy into your company’s safety program, including incentives.

KISS

Keep it Simple Stupid! Don’t make an incentive program so complicated that your employees don’t understand what they need to do in order to receive the award. If it’s too complicated, a safety incentive program could backfire by lowering employee morale.

Providing a safe working environment is every employer’s responsibility. The good news is that efforts to create a safer workplace – such as safety incentive programs – can also help improve your bottom-line.

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The best way to reduce workers’ compensation insurance and commercial liability insurance costs is to create a safer work environment that reduces the number and severity of injuries. Whether your workplace is filled with hazards like a construction site or imposes minimal danger like a retail space, it is your responsibility as an employer to create the safest work environment possible.

One way to create a safer environment for employees, customers, vendors, etc. is to use safety signs to draw attention to potential hazards.

Several agencies such as the Occupational Safety and Health Administration (OSHA) and the American National Standards Institute (ANSI) set standards and regulations for the design, use, and placement of workplace safety signs.

Here are three things to consider when using signs to improve safety, lower injuries, and save on insurance costs:

OSHA has three classifications of signs:

• Danger Signs are used when there is an immediate danger, and special precautions are needed. These signs need to be red, black, and white.
• Caution Signs are used to warn people about potential hazards or to caution against unsafe practices. Those signs need to have a yellow background and black panel with yellow letters. Letters placed on yellow backgrounds need to be black.
• Safety Instruction Signs are used for general instructions and suggestions regarding safety measures. These signs need to have a white background, green panel, and white letters, and any letters on a white background must be black.

Location

Signs should be placed where they can be read from a safe viewing distance, so people have time to prepare to enter or avoid the area. If needed, safety signs should be displayed with illumination or retro-reflectiveness so they can be read under normal operating conditions.

Signs should NOT be placed on or next to moveable objects such as doors and windows and should NOT be a distraction or create a hazard. Safety signs need to be protected from damage.

Signs should be used in these areas:

• where there is a risk of injuries such as uneven ground or the risk of falling objects
• where personal protective equipment is required
• where equipment poses a threat such as loud machines that can cause hearing loss
• where dangers aren’t visible or apparent such as around radiation or irritating chemicals
• where equipment such as forklifts and mobile cranes are used
• where potentially dangerous substances are located
• where there is asbestos, where it is suspected to be, or where it has been recently removed

Content

Keep your messages concise and straightforward and easy to read, so people are quickly alerted to potential dangers. Use vivid colors, so your signs stand out even in busy areas.

Use symbols, diagrams, and images where possible to bridge any language barriers. Lettering should be large enough that a person with normal vision can read the sign at a distance where they still have time to prepare for or avoid potential danger.

Safety signs are a cheap and easy way to alert employees, customers, vendors, etc. to potential hazards, which should reduce the number and severity of injuries and help lower your workers’ comp and liability insurance costs.

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Give the experienced independent commercial insurance agents at American Insuring Group at (800) 947-1270 or (610) 775-3848 or connect with us online. We will compare the cost of your coverage with several companies to ensure that you get the lowest price.

Are you interested in lowering your workers compensation insurance and related costs? Would you like to improve employee morale, increase production, and reduce absenteeism? Implementing a workplace safety program can do all that and so much more.

It is true that developing a safety program takes time and effort, and it can be difficult to measure the return on investment, but research has shown that it is definitely worthwhile.

$170,000,000,000.00 Per Year!

According to OSHA, “Businesses spend $170 billion a year on costs associated with occupational injuries and illnesses -- expenditures that come straight out of company profits. But workplaces that establish safety and health management systems can reduce their injury and illness costs by 20 to 40 percent. In today's business environment, these costs can be the difference between operating in the black and running in the red.”

And about that ROI… it’s been estimated that for every dollar invested in injury prevention, businesses will see a $2 to $6 return, according to Safety and Health Magazine. That's an ROI of 100% to 500%!

Here are four ways your business can benefit from implementing a safety program

#1. Lower Workers’ Compensation Costs

Often, workers compensation (WC) costs are one of the highest insurance costs in a business. It has been estimated that employers pay almost $1 billion per week for direct workers' compensation costs alone.

Three factors go into determining your workers comp insurance premiums: Classification Code, Payroll, and Experience Modification Rate. Classification codes are based on the type of business you’re in and the tasks your employees perform. There is a corresponding WC rate (which varies by state) for each classification code. The more hazards an employee is exposed to, the higher the rate. The amount of payroll a business runs annually also affects your WC premiums. There isn’t much you can do about these first two; they are what they are

But the third factor – your experienced modification rate – is something you have some control over. Every business is given MOD, which is a number that represents its insurance claim history. The average MOD is set at 1.00. If you have few or no history of claims, your MOD can go lower, which means lower premiums. The more claims you have, the higher your MOD goes, and the higher your WC premiums.

So, the best way to reduce your WC insurance premiums is to avoid workplace accidents, and the best way to do that is with an effective safety program.

In Pennsylvania, you can also receive a five percent discount on WC premiums if you have a safety committee that meets the requirements for state certification.

#2. Avoid OSHA Penalties

The Occupational Safety and Health Administration (OSHA) has stringent workplace safety guidelines that every business is expected to follow. Failing to abide by these rules and regulations can result in expensive fines.

Here is a list of OSHA’s penalties:

• $12,934 per violation for serious, other than serious, and posting requirements violations
• $12,934 per day beyond the abatement date for failure to abate
• $129,336 per violation for willful or repeated violations

In the fiscal year 2017, OSHA reported the most-citied violations were 6,887 violations regarding fall protection, 4,652 violations regarding hazard communication, 3,697 violations regarding scaffolding, and 3,381 violations regarding respiratory protection 

Implementing a safety program specific to your industry and your business that follows OSHA’s guidelines can help you avoid costly fines. OSHA offers many publications on everything from roof tarping safety to preventing workplace violence to help you create a safer work environment and avoid OSHA’s penalties.

#3. Avoid Costly Accidents

Accidents can be costly. You may find yourself paying for an accident investigation, property damage repairs, insurance deductibles, administrative expenses, and recruiting, training and compensating replacement workers.

You may also face the hefty costs involved in a lawsuit. Accidents and lawsuits can also affect your reputation, which can affect sales and your ability to attract skilled employees. Avoiding accidents also can lower your worker's comp insurance premiums. 

#4. Keep Employees Safe

Ensuring a safe work environment for your employees is the right thing to do and just makes good business sense. It should be your number one priority.

Safe work environments improve employee morale and make your place of business an attractive place to work. This usually means more productive employees, better service, a better quality product, and more skilled employees. OSHA estimates that lost productivity from injuries and illnesses cost businesses $60 billion every year.

If you want to see the financial rewards of a safety program, it’s essential to have a written policy in place and make it clear that safety is a priority and that the policies and procedures will be enforced. And you should continually provide safety training and look for ways to improve your safety program.

So, now that you have the facts in front of you, will you be taking the time to develop a workplace safety program?

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