Building a Business Case for Safety

Transcription

1 8 th Annual Workers Compensation Conference Building a Business Case for Safety May 27, 2009 Bob Pierce Manager, Certification and Education Health and Safety Division Bureau of Workers Compensation

2 Highlights Build a Business Case for Safety PA WSC Program & Certification Requirements HandS Electronic Filing Resources

3 Hidden Cost of Accidents Direct (Insured) Medical Compensation Indirect / Hidden (Uninsured) Direct : Indirect $1 to $4 - $8 Employee Lost time from work Loss of earning power Economic loss to family Company Loss of production Loss of crew efficiency Failure to fill orders Damaged tools/equip Damaged equip out of service Spoilage fire, water, chemical etc

4 Covering the Indirect Cost of an Accident/Incident Calculating the additional sales revenue required to cover indirect cost

5 A-Z Inc. Income Statement Gross Revenues (GR) $1,000, *Cost of Goods Sold ($400,000.00) $600, Gross Profit (GP) Less Operating Expenses *Depreciation ($150,000.00) *SG&A (Selling, General, and Administrative Exp ($200,000.00) $250, Operating Income Less Interest Expense Loans, equipment, Mortgage, etc ($10,000.00) $240, NIBT (Net Income Before taxes) Tax Expense 40% ($96,000.00) $144, NIAT (Net Income After Taxes) 14.40% Net Profit Margin = NIAT / GR $144, / $1,000,000.00

6 Determine Addition Sales Volume Insured, Direct Cost = $6, Uninsured, Indirect Cost for an accident 4 X $6, = $25, Divide the cost of the accident by the company s year end net profit margin

7 Calculation for A-Z Inc. Annual ratio, net profit to sales = 14.40% Indirect cost of accident = $25, Estimated sales volume required = $25, % Estimated sales volume required/yr = $173,611.11

8 Additional Sales Volume Annual Indirect Net Profit Margin Cost 3% 4% 5% $5,000 $167,000 $125,000 $100,000 $25,000 $833,000 $625,000 $500,000

9 Calculating Workers Comp Premiums WC premium costs are driven by three primary factors: 1. The industry you work in 2. Your annual payroll 3. Your claims cost

10 Verify Your Rating Information!! Class Code Rate Estimated Payroll Premium $2,000, $60,000.00

11 Verify Your Rating Information!! PCRB *PA Basic Manual *Go to Manuals *Click on latest Revision # *Section 2 Classification

12 Classifications Regular and frequent job duties

13 Estimated Manual Premium Class Code Rate Estimated Payroll Premium $2,000, $60, $1,200, $18, $ 777, $ 7, $85, Total Estimated Manual Premium

14 Experience Modification Rating (EMR) How the Experience Modification Rating (EMR) Affects What You Pay The EMR system averages claims cost over a three-year period. The EMR factor is multiplied by the manual premium to obtain the actual premium due.

15 EMR Factor With an average claim history your EMR would be 1.00 With a better than average claim history your EMR would be below 1.00 With a worse than average claim history your EMR would be above 1.00

16 EMR Example Manual Premium EMR Actual Premium $85, $ 85, $85, $ 63, $85, $127,500.00

17 Calculate your potential savings Current Workers Comp Premium calculations are on the Declarations Page of your workers comp policy. Manual Actual Year Premium EMR Premium EMR 5% Credit Savings 1 $85, $127,500 $ 00 $6,375 = $ 6,375 $121,125 (5% credit deducted) 2 $ 1.25 $ $ + $ = $ 3 $ 1.00 $ $ + $ = $ 4 $.90 $ $ + $ = $ 5 $.75 $ $ + $ = $ Total Savings $6,375

18 Calculate your potential savings Manual Actual Year Premium EMR Premium EMR 5% Credit Savings 1 $85, $127,500 $ 00 $ 6,375 = $ 6,375 $121,125 (5% credit deducted) 2 $85, $106,250 $ 21,250 + $ 5,312 = $ 26,562 $100,938 (5% credit deducted) 3 $ 1.00 $ $ + $ = $ 4 $.90 $ $ + $ = $ 5 $.75 $ $ + $ = $ Total Savings $ 32,937

19 Calculate your potential savings Manual Actual Year Premium EMR Premium EMR 5% Credit Savings 1 $85, $127,500 $ 00 $ 6,375 = $ 6,375 2 $85, $106,250 $ 21,250 + $ 5,312 = $ 26,562 3 $85, $ 85,000 $ 21,250 + $ 4,250 = $ 25,500 4 $85, $ 76,500 $ 8,500 + $ 3,825 = $ 12,325 5 $85, $ 63,750 $ 12,750 + $ 3,188= $ 15,938 $ 60,562 (5% credit deducted) Total Savings $ 86,700

20 Pennsylvania Certified Safety Committee Program 1993 Workers Compensation Act Amended established a 5% policy premium discount for creating and certifying a workplace safety committee 1996 Further amendments provide five premium discount periods 2002 Additional amendments allow unlimited discount periods* * Assuming that all mandated compliance requirements have been maintained

21 Pennsylvania Certified Safety Committee Program How big is the Pennsylvania Workplace Safety Committee Program?

22 Pennsylvania Certified Safety Committee Program Currently there are over 8,200 initially certified Workplace Safety Committees covering over 1,100,000 Pennsylvania employees

23 Pennsylvania Certified Safety Committee Program Approximate cumulative total of employer premium savings Over $330,000,000 That just reflects the 5% premium savings

24 Basic Program Requirements Meet Monthly WSC in existence and operating for six full calendar months prior to submitting an application Minimum of two employer and two employee representatives.

25 Basic Program Requirements Annually train all committee members by qualified trainers; Hazard Detection and Inspection Accident & Illness Prevention Investigation Safety Committee Structure and Operation Record and maintain: Membership Lists Meeting Agendas Attendance List Meeting Minutes

26 Audit Overview Random / Target Audits 30 to 45-day notification Opening conference Tabletop On-site audit Verification of the information submitted Closing conference Issue Compliance / Non-compliance Rating Non-Compliance issues explained

27 HandS Health and Safety Division s new online processing system

28 How will I benefit by using HandS? Convenient and user friendly Eliminates mailing delays associated with paper forms Enables employers to file initial and renewal certification forms electronically Allows for the electronic exchange of information which results in: Quicker determinations Higher approval rates

29 Application Process Initial, days prior to WC policy renewal date and active for six full consecutive months prior to signing and submitting application. Renewal days prior to WC policy renewal date. Letter sent to employer after determination that certification requirements have been met.

30 Frequently Asked Questions Is there a filing deadline grace period? NO!! Recommend reminders such as: MS Outlook Tickler file Calendar Can the required annual training count as a monthly meeting? YES, as long as you provide: An agenda Document attendance Document that training occurred in the meeting minutes

31 Additional FAQs Keyword Search: hands Click on: Workplace Safety Committee Certification Program FAQs

32 Resources Where can I receive safety training for specific areas? Your Workers Comp Carrier Fire Department OSHA National Safety Council Coming Soon Pennsylvania Health and Safety Institute

33 Health and Safety links and resources PennSafe Right to know Return to work Wellness Coming Soon View training session dates and locations. Participate. Learn.

34 For more information Go to: keyword: workplace safety Click on: PA Workplace Safety Committee Program

35 Visit Our Website PA Workplace Safety Committee Certification Program Certification process overview Online filing information Health & Safety contact information PennSAFE schedule for required committee member training Certified Employers Network

36 Questions?