In an ideal world, your CEO would be as passionate about protecting your workers’ health and safety as he was about helping the company make money. But, alas, his values and yours will probably never be the same. The saving grace is that health and safety does help your company make money. Workplace injuries and illnesses cost companies more than most CEOs realize—both indirectly and directly. Modern research has demonstrated that the indirect costs are far more significant than the direct costs. But because these costs are indirect, they’re hard to identify and precisely quantify. So the savings realized from avoiding these costs tend to be abstract and vague.
Although it’s important to educate CEOs about the indirect costs of injuries, the typical CEO’s focus on direct costs, including lost work time and higher workers’ compensation premiums, is something you can turn to your advantage. So don’t get so caught up trying to quantify the indirect costs that you overlook opportunities to make more hay from direct costs. In fact, one such opportunity might be right in front of your nose. Many provinces offer workers’ compensation incentive programs that can result in significant and quantifiable savings of direct costs. Such programs offer reduced premiums and/or rebates to companies that implement safety initiatives and reduce the number of work-related injuries. Some of these workers’ comp programs are new with Yukon’s CHOICES program being the latest (it was introduced last year). Other programs have been around for a while. For example, Alberta’s program was first implemented in 1990. These programs could represent a significant opportunity to enhance the return on investment of your safety program.
We’ll tell you more about how workers’ comp incentive programs work, including the types of programs available, what employers must do to participate in these programs and how you can use them to build a stronger business case for safety. There’s also a chart here showing the incentive programs offered by the provinces and territories.
Types of Incentive Program
The provinces and territories have two basic types of workers’ comp incentive programs:
Experience rating. Every jurisdiction has an experience rating system or program, at least for larger companies. Under such programs, a company’s claims experience is compared to its claims history as well as to that of other companies in its industry, usually taking company size into account. If the company’s claims experience is better than its peers, it gets rewarded with a rebate or discount on its premiums. These rewards can be quite large. For example, in New Brunswick, companies can earn up to 40% discounts on their premiums.
Rebates and discounts are the “carrots” in these programs; the programs also typically include “sticks.” If the company’s claims experience is worse than its peers, it must pay a surcharge. And these surcharges can be hefty— in New Brunswick, for instance, companies can be hit with surcharges of up to 80% of their premiums.
Safety certification. In addition to experience rating programs, six provinces and territories—AB, BC, NL, NT, NU and YT—offer another type of incentive program that we’ll refer to as safety certification programs. In general, these programs have very detailed and specific requirements that companies must meet to qualify for financial rewards. For example, companies may need to get “certificates of recognition” (CORs) by proving that they’re in compliance with the program’s requirements and maintain compliance to earn rebates or reduced premiums.
Insider Says: Some jurisdictions have incentive programs for specific industries. For example, Manitoba and Ontario have incentive programs solely for companies in the construction industry. Ontario also has designated incentive programs for small businesses, such as the Safe Communities Incentive Program and the Merit Adjusted Premium Plan.
Requirements for Participation
The two types of workers comp’ incentive programs have very different participation requirements:
Experience rating. Companies don’t usually have to do anything to participate in an experience rating program. Companies of a certain size or that pay premiums over a threshold amount are generally enrolled in the program automatically. For example, companies in Ontario that pay more than $25,000 per year in premiums are automatically enrolled in the New Experimental Experience Rating (NEER) Program. And in Saskatchewan, all companies participate in one of two tiers of the Experience Rating Program: Companies that have paid premiums of less than $15,000 over three years participate in the Standard Program while those that have paid more than $15,000 over three years participate in the Advanced Program.
Safety certification. Participation in a safety certification program is much more complicated. The specific requirements vary by jurisdiction, but they all have one feature in common: They consider more than just a company’s workers’ comp claim rate. Safety certification programs look at a company’s OHS program and overall approach to both workplace safety and return-to-work.
In AB, BC and NL, companies must earn CORs to participate. Alberta’s Partners in Injury Reduction (PIR) Program is the oldest safety certification program and a good example of the typical requirements for such programs. To earn a 5% premium rate discount, a company must earn a COR by successfully implementing an OHS program. The OHS program’s components will vary depending on the nature and scope of the company’s business but must contain the following essential elements:
Once a company has implemented an OHS program, it must have the program independently audited by a “certifying partner” appropriate to its industry, such as the Alberta Construction Safety Association or Manufacturers’ Health & Safety Association. If the audit shows that the OHS program meets the quality standards, the certifying partner will issue a COR to the company. The COR is valid for three years. The company must conduct internal audits for each of the next two years. When the COR expires, it must have another external audit done to renew the COR.
On top of the 5% premium rate discount for earning or maintaining a COR, Alberta companies with CORs can earn additional discounts in one of two ways:
1. Improving claims rates. The company’s current incident performance is compared to its historical performance. If its claims’ costs improve:
2. Maintaining industry leadership. The company’s claims costs are compared to the industry’s average claim costs for two consecutive years. If the company’s claims experience is:
In YT, only companies that want to participate at the highest level of the CHOICES program must earn CORs. And in NT and NU, companies that want to participate in the Safe Advantage program are evaluated on both their claims cost experience and their management practices. Companies must complete annual management practice questionnaires with two sections: one on injury prevention and the other on return-to-work practices. Company questionnaires are “graded” and if they get at least a mark of 70% on both sections, they may qualify for a refund.
Insider Says: Companies may be able to participate in both the jurisdiction’s experience rating program and its safety certification program. For example, in BC, a company can get a discounted premium under the experience rating program and also get a rebate if it earns its COR.
Benefits of Participation
Companies that participate in any type of workers’ comp incentive program reap various benefits:
Experience rating. To benefit from an experience rating program, companies must improve their own workplace safety and injury performance from year to year. They must also strive to do better than their peers in protecting workers. If they do so, companies will get directly rewarded with specified rebates or discounted premiums. And of course, such companies will also realize indirect cost savings simply as a result of preventing injuries and illnesses, such as avoiding the costs of hiring replacement workers, productivity losses from damage to morale and harm to the company’s reputation.
Safety certification. Because safety certification programs have such specific requirements, it will likely cost companies some money to earn the necessary CORs. For example, companies may have to pay for worker training and audits of their OHS programs. But companies that participate in safety certification programs get direct benefits in the form of rebates or discounted premiums that will cover or at least partially defray those costs.
Example: In BC, a company earns its Health and Safety COR for the Partners Program. It reduces its claim costs over one year by 20%. The company reports assessable payroll of $2 million. So its base rate is $2 and its premium is $40,000. The company is entitled to discounts of:
Companies that participate in safety certification programs also get the same indirect benefits as companies that participate in experience rating programs. However, because companies must satisfy extensive requirements to earn a COR, they’re likely to see greater indirect benefits than companies that participate in experience rating programs. For example, in 2004, Alberta companies that had earned CORs had 24% lower claims costs than companies without CORs.
Conclusion
The downside of experience rating programs is that they focus on a company’s workers’ comp claims and don’t consider the workplace’s OHS program and overall approach and commitment to workplace safety. That’s why the trend in workers’ comp incentive programs is away from experience rating and toward safety certification programs. These programs look at the workplace’s overall safety picture.
At the very least, your company should be making efforts to reduce the number of workplace injuries and thus its workers’ comp claims to benefit from the province’s or territory’s experience rating system. But your company may be able to get even bigger discounts or rebates by participating in a safety certification program. Yes, the requirements of these programs can seem daunting and may initially cost the company money to achieve. But when you carefully examine the programs, you’ll see that they often require companies to do things that they’re already doing—and, if they’re not, probably should be doing.
By showing senior management that taking steps to participate in a workers’ comp incentive program will result in direct and concrete workers’ comp benefits, you’re more likely to win their support. Instead of saying, “If we implement certain safety improvements, we’ll save some money, but I don’t know exactly how much,” you’ll be able to say, “If we implement these safety initiatives, we’ll get a 15% discount in our premium and a 5% rebate.” Which argument sounds more compelling to you?
Workers’ Comp Incentives Programs
FEDERAL:
Workers who work for federally regulated employers are covered by the workers’ compensation law of the province in which they work.
ALBERTA: Partners in Injury Reduction (PIR): offers up to 20% off industry rates [www.wcb.ab.ca/pdfs/pir_broch.pdf]
BRITISH COLUMBIA: Partners in Injury and Disability Prevention Program (the Partners Program, for short): offers up to a 15% rebate of premiums [www.worksafebc.com/news_room/campaigns/partners_ program/default.asp]
MANITOBA: Construction Health and Safety Pilot Incentive Program: offers a 5% reduction of the premium rate to qualifying construction companies [www.wcb.mb.ca/about_wcb/policy_manual/s30_finance_assessments_admin/assessments/35-20-20_construction_association_safety_accreditation_program.html]
NEW BRUNSWICK: Experience Rating System: offers up to a 40% discount on premiums [www.whscc.nb.ca/emp6_e.asp]
NEWFOUNDLAND/LABRADOR: PRIME Program: offers 5% refund on average base assessments [www.whscc.nf.ca/prime/about.htm]
NORTHWEST TERRITORIES/NUNAVUT: Safe Advantage Program: offers premium refunds [www.wcb.nt.ca/safe_advantage/]
NOVA SCOTIA: Safety Incentive Program: an experience rating program that reduces rates more quickly for employers that improve their safety records [www.wcb.ns.ca/WCBN/index_e.aspx?ArticleID=247]
ONTARIO: Offers a number of incentive programs based on industry (such as the CAD-7 Program for employers in the construction industry) and size of company (such as the New Experimental Experience Rating (NEER) Program for companies that pay more than $25,000 per year) [www.wsib.on.ca/wsib/wsibsite.nsf/Public/PreventionTIP#incentive]
PRINCE EDWARD ISLAND: Experience Counts Program: offers premium discounts of up to 25% [http://www.wcb.pe.ca/index.php3?number=1013032]
QUÉBEC: Experience Rating Program: offers workers’ comp rate reductions for large businesses
SASKATCHEWAN: Experience Rating Program: offers up to a 30% discount on premiums [www.wcbsask.com/WCBPortal/appmanager/WCBPortal/WCB2?_nfpb = true&_pageLabel = page_employers_ experience_rating]
YUKON: CHOICES Program: offers rebates of up to 5% of an employer’s annual assessment or reinvestment rewards [wcb.yk.ca/EmployerInformation/CHOICES/Default.aspx]
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