Occupational Health and Safety issues can have a dramatic impact on the bottom line. Workers compensation premiums are sometimes a crippling cost to business. Teresa Russell talks with three companies that have addressed this issue, saved hundreds of thousands of dollars in premiums between them and have much safer workplaces as a result.
Occupational Health and Safety issues can have a dramatic impact on the bottom line. Workers compensation premiums are sometimes a crippling cost to business. Teresa Russell talks with three companies that have addressed this issue, saved hundreds of thousands of dollars in premiums between them and have much safer workplaces as a result
At the beginning of any article like this, you would expect be able to read a bit about the current laws, regulations and common practices surrounding the topic. However, in the case of workers compensation insurance, systems are very complex and differ so much between Australian states and territories, that a summary is impossible.
In Queensland, workers compensation insurance is completely run by the state government. In Western Australia, companies go to private insurance companies and negotiate a premium. In New South Wales, the government runs the system, but uses private insurers to administer it. Payouts for the same injury can vary greatly from state to state. If you run a national business, you have to contend with eight different workers compensation systems – one for each state and territory.
Regardless of where your business is located, there is one thing that holds true. Workers compensation insurance is a major cost to business and if poorly managed, it can seriously affect company profits. In 2001-02, there were 297 compensated workplace deaths in Australia, which are not only costly, but also bad for business in terms of employee morale and adverse publicity.
Australian businesses are paying almost $6 billion in premiums each year, with the average premium nearly three times that paid by New Zealand employers. Premium rates in 2001-02 across the Australian schemes increased to an average of 2.47 per cent of payroll (from 2.43 per cent of payroll in 2000-01). Overall, 14 per cent of employees off work for at least one week through compensated injury or disease are still off work after 26 weeks. Although the proportion of all workers compensation claimants who receive benefits for longer periods of time (26+ weeks and 52+ weeks) is relatively low at 1.3 per 1000 workers, these cases comprise a substantial proportion of the total costs of workers compensation schemes.
The following companies realised they were paying far too much in workers compensation premiums. They have made changes that have had a dramatic and positive effect on their annual premiums, the number and nature of lost time injuries (LTIs) and their bottom lines.
V & V Walsh employs 180 onsite workers at its Bunbury (WA) meat processing plant. Four years ago, it had 25 compensation claims and was paying 12 per cent of its payroll in workers compensation premiums. The next year, when the number of claims went to 54, management decided to hire an experienced meat processing OHS consultant (a trained occupational therapist) one day per week. As a result of the changes she suggested and the new safety focus across the company, the number of claims is down to 17 this year, the value of those claims has dropped 80 per cent and the company anticipates its premiums next FY will run at about 4 per cent of payroll. The industry-gazetted rate is 11 per cent.
Graeme Watson, Walsh’s human resources manager, says that the consultant performed a risk assessment on the work practices and processing areas, where most of the lacerations and shoulder strains were occurring. “We changed a lot of mechanical processing and work flows according to her recommendations, then started enforcing our policy of wearing mesh or cut resistant gloves. The number of lacerations especially decreased,” said Watson. Job rotation and multiskilling was introduced to help minimise shoulder strains by reducing repetitive tasks. The company also invented a pelt puller (a machine that removes the hide from a sheep carcass) to replace a difficult manual process.
“We have now established a good workplace culture. Employees know that if they are injured, they will go to the doctor and be straight back to work with alternative duties and rehabilitation,” said Watson. The medical practice the company uses has a list of alternative duties and if none of them are appropriate, the injured employee may undergo classroom training during his or her rehabilitation phase.
Watson says it is vital to have open communication between doctor, employee, company and insurer in order to keep on top of each claim. “Another thing the consultant highlighted was that it cost us more in increased premiums than we recouped in lost time wages claims.” said Watson. Unsurprisingly, V & V Walsh no longer makes lost time wages claims.
The Airlite Group is a Western Australian building services company that employs more than 1000 people. According to Steve Willis, group human resources manager, “four years ago, we had a poor claims history and our premiums reflected this.” The turning point came with another premium hike. The company was finding it difficult to get insurance. Airlite’s group managing director, Jim Bond, declared, ‘It is unacceptable to injure people at work,” and all employees, driven by the board, set about improving the company’s safety record. Since then, the number of claims and LTIs has reduced by 70 per cent and premiums have reduced by 60 per cent to a rate that is now “somewhat below” the industry gazetted rate of 7.67 per cent of payroll.
Airlite’s main focus was to develop an injury management process, which brought rehabilitation management in-house – not with Vero, their new insurer. Two years ago, the company invested $250K to set up an HR department to take over this function and Willis claims it paid for itself in 12 months.
If a worker is injured, Airlite’s OHS officer will collect the employee and drive the injured worker to the doctor of their choice, then take them home again. The OHS officer consults with the doctor about alternate duties available, and then agrees rehabilitation and return to work plans with both the doctor and patient. “The presence of the OHS officer opens the chain of communication between the doctor, the employee and us. I don’t think you can afford not to do this. The problem most companies have with workers compensation is they try to let the system manage itself – and it doesn’t,”asserts Willis.
Airlite’s improved risk management and safety focus has helped to create healthier and happier workers, according to Willis. Sick days have reduced by 15 per cent and staff turnover has gone from 60 per cent down to 37 per cent in the last two years. The company was recently awarded gold certification from Worksafe WA – the only cleaning company to have achieved this honour. Willis has developed a checklist of 10 elements of a good injury management system (See box).
TNT Australia employs 5,500 people in Australia across its McPhee, Riteway and TNT brands. When its workers compensation premiums blew out 5 years ago, the company hired its first OHS manager whose remit was to tidy up all the long-term claims, then start building up OHS management systems.
Adrian Ditcher, TNT Australia’s corporate OH&S manager, says that there are three KPIs used globally to measure safety. They are LTI incident rate, average duration for LTI and blameworthy road traffic accidents. There has been a measurable improvement in all KPIs for the past three years. “Because the business has made acquisitions during this time, it is difficult to make valid comparisons from year to year, but all indicators are trending in the right direction,”said Ditcher.
During the past five years, TNT has changed insurance companies “a few times.” Ditcher says, “For every dollar you spend on an injury, it can effect your premium three to five times over the next three years. So it is vital you manage your claims closely.”
He has introduced a proactive intervention policy to manage injured workers claims. “As soon as we hear about an injury, we get the employee to a local occupational physician, provide the doctor with details of alternate tasks available, then get them back to work as soon as possible, after consultation with a rehab doctor. The longer an employee has off because of an injury, the less likely they are to return to work,” he said.
In late 2002, TNT’s group managing director funded a company-wide five-star safety-rating program. Sixty depots worldwide were audited and had to receive a minimum three-star grading. All 15 Australian depots achieved the goal, with four making it to four stars. Ditcher says they decided not to advertise this program with any great fanfare to staff, so it wouldn’t be perceived as a program that had a beginning and an end. Rather, it was subtly integrated as a further improvement in safety management processes.
He says that the most important element in an effective safety policy is to get top-down commitment, not just CEO sign-off. Ditcher proudly quotes Richard Taylor, the principal consultant with the National Safety Council of Australia, who led the five-star audit team. “TNT Australia has the best corporate safety culture I have seen in my nine years of auditing. TNT is a classic example of a company where safety has been driven top-down and driven hard.”
Elements of a good injury management system
• Maintain a positive relationship with all parties
• Communicate
• Know the legislation
• Always provide alternate duties
• Monitor the recovery
• Establish a network of treating medical practitioners
• Don’t be scared of the workers compensation system
• Be flexible
• Maintain constant contact with insurer
• Maintain accurate documentation
