Maintain your Mod
By Ken Mushet

Ask anyone on the construction site if they think that they get paid enough, and you will probably get the same answer. Ask for a discount on building supplies and listen to the laughter. Try to submit a change order and brace yourself for the aftermath. Yet with all these financial pressures, contractors are expected to continue to build quality product with tight budgets and compressed schedules.

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Gaining a financial advantage is more important than ever. With a number of employees working for you, Workers Compensation premium costs can be significant piece of your insurance costs.

Workers Compensation is a no-fault system. The trade off of the Workers Compensation system is that the employer has to pay to treat and compensate an injured employee, but the employee can not sue the employer because of the injury.

Unless you are self-insured, the rate you pay is based on the industry you are in, your payroll, and how much you have cost the insurance company in the past. Based on your trade, you will pay so much per every $100 of payroll.

For example, roofing companies in the Southwest pay approximately $12 for every $100 of payroll.

The insurance rate (the dollar cost per $ 100 of payroll) for a specific industry is determined by the National Council on Compensation Insurance (NCCI) in the Southwest. The insurance rates for occupational classes are based on previous loss information.

Assuming a similar payroll, the big difference in what you pay versus what rates your competition pays is based on your experience modifier. (Ex-mod)

It is the "multiplier" of the standard insurance cost. >>

You start out your first year in business with an Ex-mod of one (1). If you have been in business a while, the insurance company does not count the current year, and analyzes the previous three years of how frequently employees were injured, and how much it cost them to pay for their injuries.

Here is an example of the premium difference between two companies: What would you do with an extra $ 314,400 a year?

Although injury frequency has been on the decline, medical and indemnity costs have been rising. Because of this, the benefits of a lower frequency rate have not been as significant. In order to affect the frequency and severity of injuries, effective safety management is critical.

The main elements of an excellent contractor safety management process are outlined in H.A.R.D.H.A.T.:

1. Hazard Identification & Control - Job site inspection and employee observation.

2. Accountability - Designating responsibilities and disciplining.

3. Real Commitment - Leading, managing, planning, and funding.

4. Detailed Involvement - Safety committees, safety suggestions, and rewarding.

5. Hazard Evaluation - Management system design and tracking contractor performance.

6. Accident/ Incident Analysis - Determining root causes and tracking corrective action.

7. Training and Education - Tailgate meetings, and training for employees, owners, foreman and superintendents.

When reviewing the amount of payroll that is counted toward your Workers Compensation premium, make sure that the payroll dollars do not include money paid for overtime. Time and a half or double time dollars paid to employees only count as the straight time dollars when it comes to calculating the payroll for workers compensation premiums.

Here are some things to consider regarding your Workers Compensation Program:

1. Post the notices regarding Workers Compensation. (In English and Spanish)

2. Post the medical provider for where you want your employees to go.

3. Implement a post injury drug testing program.

4. Have employees sign that they have been trained in your policies and procedures.

5. Train employees in first aid and have first aid supplies ahead of time.

6. Plan ahead for emergencies on job sites out of town.

7. Have your medical provider visit your facility or job site to understand the work you do.

8. Review your insurance company loss runs regularly.

9. Train employees to report injuries immediately, and get them good medical treatment.

10. Investigate the accident right away, and report suspicious claims.

11. Keep a First Aid log for cuts and scratches, and file claim forms for doctor or clinic visits.

12. Have written job descriptions and a medical provider familiar with your work.

13. Have a good safety management process and hiring process.

14. Bring employees back to work, even if on light duty, as soon as possible.

If your insurance company or designated medical provider is not providing good service, resolve the situation. If it cannot be resolved, find a replacement that is competent, fair, and responsive to your needs. By acting proactively, you can turn workers compensation into a cost saving project. <<

Ken Mushet is a Certified Safety Professional (CSP) and has over fifteen years' safety and environmental experience implementing results driven improvements. He is a Phoenix based, Loss Control Engineer with Lovitt & Touche.