SMS: A Direct Path to Lower Workers’ Compensation Premiums.

 

 

Preface

Last week I received a phone call from a small plumbing & HVAC Company CEO with around 55 employees. The call was regarding “workers’ compensation premiums” and how to keep them from increasing as a result of workers’ compensation claims. There are many ways to approach safety & health for small business and unfortunately, most ways simply aren’t enough to make a real impact on the company’s revenue. That is why I always suggest a “safety management system”. Such a system ensures that no gaps are present in the safety & health efforts of the subject organization and ensures a way for continual improvement of the system and overall safety & health of the employees. The complete - safety management system is the most effective means of reducing the potential for workers’ compensation claims.

 

The CEO mentioned above expressed his concern by explaining that (1) 75K workers’ compensation claim from last year has resulted in a 30% increase in his company’s workers’ compensation premiums for the coming year. His current annual premiums are roughly 100k. So 100k + 30% is a 30k increase for who knows how many years to come. So the cost of this single injury to the employer will end up being 30k per year for x years. Now that’s a good reason to consider implementing a safety management system into the workplace.

 

 

First Things First - Gap Analysis

The first order of business is to identify gaps (risk exposures) in the current safety system. If no system is present now, then you may skip this step. The gap analysis usually requires a safety expert or insurance risk expert. The idea is to determine if the system consists of specific elements, which deal with areas such as hazard identification, employee education and accountability. I’m offering this oversimplified explanation for the sake of the laymen reader and because there are literally hundreds of ways to structure a safety management system and execute a gap analysis. Once the gaps have been identified, the idea is to develop a control measure that fills the gap.

 

 

Choosing a Safety Management System or SMS Framework

If no current safety management system is present within the organization, it is possible to use an off the shelf system to establish the basic framework of the system. Attempting to construct your own system will be very time consuming and costly so I do not personally recommend this method unless you have an experienced safety staff on hand. Using an off the shelf system enables you to get started right away; performing inspections, training, meetings, audits, etc. Then you can edit the system based upon the needs of the organization. This method ensures that you get a system implemented quickly, which begins improving safety right away. If you already have a safety management system in place, it would be wise to compare the current system to the very same “off the shelf” systems. You may find that off the shelf systems are superior to your own system. In most cases, in house systems have gaps, which expose the organization to unnecessary risk. Once you have determined which system to go with, you simply get to work with implementation.

 

 

System Implementation

Now that you’ve chosen a system to implement, you must begin performing the system tasks described within the system documentation. Implementation depends entirely upon which system you have chosen because each framework is dramatically different than the next. The objective is to begin executing the tasks required by the system though. For example, most system require inspections of sites, equipment or tools and also consist of training or other elements which generate a paper trail of evidence that you’ve been running a safety management system.

 

 

Continual Improvement – Performance Measuring

The process of time and a solid safety management system framework will automatically create a safer workplace, increase safety awareness among employees and ultimately reduce the number of or probability of injuries and illnesses. So the key is to choose a system framework wisely, ensure all risks are addressed with the system framework and evaluate the overall system’s performance and effectiveness at least annually.

 

Aaron West

President | CEO

Federal Compliance Systems, Inc.

4-8-2015