By Terry Mahlman, VP of Business Services/WC Guru Spring, 2016
Fall has finally arrived and what are the first things that come to my mind? The college and NFL football seasons are underway. Major league playoffs are approaching – can the Cubs end 107 years of futility and finally win the World Series? Will we get rain this fall and winter?
And then there’s Workers’ Comp…which has to be right near the top of everyone’s minds – yeah, right.
But as far as business priorities, controlling workers’ comp costs should be near the top of a landscaper’s priorities, but it is often overlooked. I recently attended a presentation by Head Harvester Bill Arman of The Harvest Group, who pointed out that in order for a landscaper to achieve a healthy gross margin, landscapers need to focus not only on their cost of labor and materials, but also their labor burden. Labor burden includes payroll taxes and workers’ comp costs – which are controllable! Bill noted that landscapers often do a great job controlling the cost of materials and labor hours, but often overlook labor burden. Control your workers’ compensation costs and your gross margin goes up.
While it is true that you cannot control insurance carrier “manual” rates, these manual rates are adjusted for each employer based upon an underwriter’s assessment of the employer’s potential risk for losses. And the number one indicator for risk is historical losses – the better the past history of losses results in better rates for the employer.
So how do you go about controlling your worker’s compensation costs? Here are some key strategies…
1. I’ll start off with shameless plug number one – employ an insurance broker who specializes in and knows your industry, provides services geared towards controlling your insurance costs, and provides business services that help you maintain profitability. As the largest broker in CA for landscape contractors, LCIS has significant influence with workers’ compensation carriers and our agents and Claims Consultants work diligently to help mitigate the cost of any workers’ compensation claims.
2. Develop a safety culture within your organization emphasizing that everyone is responsible for safety and no job should be undertaken unless it can be done safely. This requires top management buy-in, a system of accountability, goal setting and measurement of those goals.
3. Review and update your Injury and Illness Prevention Program (IIPP) that is the blueprint of your safety efforts. Or better yet, check out the services offered by our business partner EEAP, that provides and always-current IIPP that is accessible by a smart-phone when OSHA comes to visit you at a jobsite!
4. Hire the best available employees – in all positions. Historically, newer employees and “marginal” employees file the most claims and tend to take advantage of their claims by maximizing the value of their claims rather than trying to recover and return to work.
5. Provide ongoing training and new employee orientations. New employees are statistically more likely to sustain work injuries, so orientation and training on all equipment to be utilized is essential. Regularly scheduled and documented tailgate meetings are important. Check out the EEAP services that allow you to document training on a smart phone and retrieve the documentation for OSHA when required.
6. Establish an effective Fleet & Driving Safety program that incorporates driver selection; driver training; vehicle use policy; vehicle inspection/maintenance; and accident investigation. Remember that motor vehicle accidents are a leading cause of serious injuries in the landscape industry. Plus, most motor vehicle accidents involve injuries to multiple employees.
7. Accidents do happen. In the event of an accident, arrange for prompt medical care through your insurance company’s Medical Provider Network (MPN). Medical costs of WC claims represent more than 50% of the total claim cost. Using the MPN network allows you and the insurance company to better control the cost of the claim. Be prepared and know which MPN medical provider will be utilized when an accident occurs.
8. Report claims immediately. The faster you can report a claim the better. State guidelines require you to report a claim within 5 days, but that’s really too slow. With telephone reporting processes available, 24-48 hours should be the norm. You want the claim being handled by the adjuster immediately. Statistics prove that late-reported claims cost significantly more than claims reported timely.
9. Monitor / manage the claim – get involved. Be an employee advocate; maintain continuous contact with the injured employee; maintain a relationship with the claims examiner to stay informed; attend depositions and hearings when claims become litigated. Monitor the reserves of the claim (LCIS Claims Consultants will assist you) to make sure that any open claims are properly reserved before the data is reported to calculate your experience modification (when applicable).
10. Provide modified or alternative work to injured workers when the doctor allows. Getting employees back to work quickly, on a light duty or a part-time assignment, has proven to be an effective method of reducing not only temporary disability costs, but also medical and permanent disability costs.
Workers’ compensation rates are expected to remain rather “flat” as we head into 2017, but with additional focus on these strategies, you will be poised to maintain your WC rates at a reasonable level – which will also assist you in increasing your gross margin.