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Welcome to NCM's Up to Speed Blog

Lowering Workers’ Compensation

Written By: Eric Schmitz
Posted on May 05, 2015

Workers’ Compensation insurance was designed to ensure adequate employee reimbursement from an on-the-job injury, as well as minimize lawsuits between employers and employees in the workplace. Beneficial to both employers and employees, but paid for by employers, Workers’ Compensation can be costly; research shows that over the past ten years Workers’ Compensation rates in 26 states have risen 3% per year. Continued increases are expected over the next several years. However, dealers don’t have to give in to this increase; despite the rise in costs, dealers can impact their premiums. How? By reducing their Experience Modifier (Ex-Mod).

To understand how to reduce an Ex-Mod, it is important to first understand how Workers’ Compensation is determined. Workers’ Compensation is comprised of two parts:

  1. The size of the dealership’s payroll and the employee job classifications. (Dealers cannot reduce this portion of Workers’ Compensation.)
  2. The dealership’s Experience Modifier (Ex-Mod). Dealers can impact and change the cost of their Workers’ Compensation insurance by reducing their Ex-Mod.

Premiums for Workers’ Compensation insurance are calculated using the following formula:

(Payroll)  X  (Classification Rate)  X  (Ex-Mod)
The Dealership Workers’ Compensation Premium

Every dealership has an Ex-Mod; it is based on the losses the facility has had over the past three years. The modifier factors both severity and frequency of losses and is set in the industry so that the average business has an Ex-Mod of 1.0. To learn more about how an Ex-Mod is calculated, click here.

One way dealers can reduce their Ex-Mod is by implementing a positive safety culture. Research shows that dealers that have frequent safety committee meetings, conduct regular trainings, and increase employee communications have a correlating lower Ex-Mod score. There are a variety of methods that you can use to implement a positive safety culture. Many dealers have found success through the use of a compliance and safety software.

While every software is different, the best safety and compliance software has the following features in common:

Safety Data Sheets specific to your facility’s chemical inventory. Employees must have access to chemical Safety Data Sheets (SDS), which will allow them to safely handle the chemicals used in their daily work, as well as have an informational resource in the event of an emergency. The best software will have a wide-variety of SDS available and will also allow management to upload additional sheets.

On-demand Environmental & Safety training. Employees must be able to train upon hiring, and should also have the functionality to review and retrain annually. Good software includes a multitude of trainings, such as Personal Protective Equipment (PPE), Accident Investigation, Emergency Response, and more.

Accident tracking and management. Managers require a consistent way to investigate issues, investigate them, identify their root causes, and track their resolutions. A good safety and compliance software will allow for tracking so that underlying issues are resolved.

Multi-faceted compliance management. Compliance is an every evolving entity that dealers are required to stay on top of. A good software stays up-to-date with changing regulations, prompting users when changes are made.

Self-inspection tools. Running a dealership is a complicated process; things often slip under the rug, losing importance until an inspector arrives. The best safety and compliance software allows users to continually see where they are excelling and where work needs to be done.

Safety and compliance software helps implement a positive safety culture, and therefore lower Workers’ Compensation rates by creating a culture through systematic safety program management. Improved visibility created by utilizing safety software increases employee awareness and overall safer employee actions through the creation of a consistent line of training and communication dealership-wide. In essence, employees who can take part in safety and are able to see management taking a part in safety are more likely to participate themselves, improve loss control, and lower Workers’ Compensation premiums.

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