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The Real Way to Save on Workers Compensation.... Keep Your Costs Down!

In 2013, U.S. employers reported 3.7 million nonfatal occupational injuries according to the U.S. Bureau of Labor Statistics. While this number was down from the prior year, it still shows that workplace safety must be a priority for employers. When workers get hurt or sick on the job, productivity suffers, the employer becomes less attractive to the other employees, and managers' attention shifts away from growing the business. Preventable accidents also hurt the bottom line in another way -- they eventually raise workers' compensation costs by increasing the employer's experience modification factor.

The experience modification is a number calculated by the workers' compensation rating bureau in the employer's state. It's a reflection of how the employer's loss history for the prior three years (not including the current year) compares to that of an average employer in the same industry. It takes into account the size of the employer's payroll for those years, and the number and severity of its losses. The formula penalizes an employer more so for frequent losses than for expensive ones. For example, an employer with 10 losses of $2,000 each will have a higher mod than an employer with one loss of $20,000. The insurance company must, by law, multiply the employer's workers' compensation insurance premium by the experience mod factor; a factor of less than 1.0 reduces the premium, while a factor greater than 1.0 increases it.

For small claims your increase in experience modification will be more than the actual claim itself. Therefore, it makes financial sense for employers to take steps to prevent frequent on-the-job accidents.

Here are some tips on how employer can reduce their workers' compensation premiums:

  • Management should make workplace safety a top priority. The things that are important to managers become important to workers. Provide continuing training to workers on job site safety and enforce safety requirements.
  • Obtain and review publications about the industry from the U.S. Occupational Safety and Health Administration. These publications provide practical recommendations for preventing injuries. For example, the "Construction - Hand and Power Tools" category has a document titled, Safeguarding Equipment and Protecting Employees from Amputations.
  • Keep the work environment clean. This reduces the risk of employees contracting airborne illnesses; eliminating clutter makes trip-and-fall accidents less likely.
  • Maintain machinery and equipment in good working order. Check it regularly for safe operation.
  • Institute programs to keep the workplace drug and alcohol free. Within legal parameters, test employees for drug and alcohol use.
  • Review loss information from insurance companies. Look for trends in the types of losses that occur. They could indicate dangerous work procedures, incentives that cause employees to rush, defective tools, or another factor in need of correction.
  • Take advantage of the expertise in the insurance company's loss control department, particularly if the company specializes in insuring businesses in that particular industry. They can recommend measures that have proven to work for similar businesses.

  • Consider self insuring for minor claims. For example in New York state, you can pay up to 2 doctor visits and 1 day missed pay. Self insuring will reduce your frequency and ultimately make your experience mod decrease.
  • Monitor employee morale. Unhappy workers can become careless or slipshod in their work. Take steps to improve morale and to deal with employees who may be causing problems.
  • Review the experience mod worksheet with the firm's insurance agent. Ensure that the insurance companies have accurately reported all losses to the rating bureau. Ask to have errors corrected, and follow up with the agent until it happens. Approximately 30% of experience mods are incorrect. Mostly, these are multistate risks where there is more than one insurance company involved.
  • Require employees to report all injuries, no matter how minor they appear. Make sure that injured employees receive prompt medical attention.

No one benefits when employees get hurt on the job. With focus and effort, employers can make workplace injuries less frequent and less severe. That will make their businesses better places to work and add hard-earned dollars to the bottom line.

If you have any questions about Workers Compensation costs or your experience modification, give us a call at 888-997-9801 or visit our website at

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