Do Not Underestimate the Importance of OSHA Incidence Rates December 2012 Lockton Companies Today, more so than ever, a contractor s safety record is a critical element in the bid proposal process. In the current economy, with increasing pressures to complete projects on time and within budget, one could argue that it is the most important factor. Owners and developers need to select contractors that not only have the experience and resources to complete the project on time, but they also want a contractor that manages safety and maximizes productivity. STEVEN POLICH Senior Loss Control Consultant Lockton Companies Omaha 402.970.6174 spolich@lockton.com They have come to realize that jobsite safety and productivity go hand in hand. When a contractor minimizes injuries on the jobsite, productivity goes up because less time is spent dealing with nonproductive activities (i.e., accident cleanup and investigation, follow-up safety training, onboarding replacement workers, possible OSHA investigations and more). Owners and developers measure a contractor s safety record in various ways, but one most often used is the OSHA Incidence Rate. Looking past the fact that Incidence Rates are lagging indicators, one cannot discount the importance of these numbers when trying to secure a contract. Managing Incidence Rates and calculating them correctly is critical, especially for small- to medium-size contractors. It can mean the difference between securing the contract and sitting on the sideline. Owners and developers need to select contractors that not only have the experience and resources to complete the project on time, but they also want a contractor that manages safety and maximizes productivity. L O C K T O N C O M P A N I E S
What Is an Incidence Rate? An OSHA Incidence Rate (IR) represents the number of OSHA recordable injuries and illnesses that occur among a given number of full-time workers (usually based on 100) over a given period of time (typically one calendar year). For example, a calculated rate of 5.0 for a contractor represents a rate of injury and/or illness at 5 per 100 workers. It does not matter if the contractor employs 20 or 2,000 workers, the rate will always be based on 100 workers, allowing one to compare rates for various contractors of different size. The following Incidence Rates are typically recognized by OSHA: Total Case Incidence Rate (TCIR) Calculated based on recordable cases from Summary 300A (lines G, H, I and J) Days Away, Restricted and Transferred Rate (DART) Calculated based on recordable cases from Summary 300A (lines G, H and I) Lost Workday Injury and Illness Rate (LWDII) Calculated based on recordable cases from Summary 300A (lines G and H) It should be noted that other acronyms are commonly used when referring to Incidence Rates, such as TCR (Total Case Rate), which is the same as TCIR and DAFWII (Days Away From Work Injury and Illness Rate), which is equivalent to LWDII. For the sake of consistency, the acronyms TCIR, DART and LWDII will be used throughout this document. 2
December 2012 Lockton Companies Calculating Incidence Rates To start, one needs access to their OSHA recordkeeping data (300 Log or Summary Form 300A) along with total hours worked in the calendar year for which the rates are being calculated. The formula for computing the rates is rather straightforward. The example below illustrates how one would calculate the TCIR, DART and LWDII for a company that worked 500,000 hours and incurred 20 recordable cases during the calendar year: Number of Cases Total number of deaths Total number of cases with days away from work Total number of cases with job transfer or restriction Total number of other recordable cases 0 3 6 11 (G) (H) (I) (J) TCIR = [Total cases from Lines G, H, I, and J x 200,000*] / Total hours worked in calendar year h h [20 cases x 200,000] / 500,000 hours = 8.0 TCIR DART = [Total cases from Lines G, H, and I x 200,000] / Total hours worked in a calendar year h h [9 cases x 200,000] / 500,000 hours = 3.6 DART LWDII = [Total cases from Lines G and H x 200,000] / Total hours worked in a calendar year h h [3 cases x 200,000] / 500,000 hours = 1.2 LWDII * The 200,000 figure in the formula represents the number of hours 100 employees working 40 hours per week, 50 weeks per year would work and provides the standard base for calculating incidence rates. 3
Strategies for Maintaining Low Incidence Rates One obvious strategy to lower OSHA Incidence Rates is to avoid recordable injuries and illnesses in the first place by practicing well-documented injury/ illness prevention strategies and industry best practices. Other strategies to consider: Be sure to include all eligible hours worked in the IR calculation. When calculating OSHA Incidence Rates, the denominator (total hours worked) must be accurate. Basic algebra tells us that the higher the denominator, the lower the rates will be. Therefore, it is important when determining the total hours worked that one does not overlook clerical staff, maintenance personnel, temporary workers or employees who are exempt (i.e., salaried). When estimating hours worked for exempt employees, do not underestimate them. If they work 50 hours per week on average and take three weeks vacation annually, the estimated hours worked should be calculated to 2,450 as opposed to 2,080 hours (40 hours x 52 weeks) commonly used when estimating full-time salaried positions. Make sure those responsible for maintaining the OSHA logs receive proper training on recordkeeping procedures. It should go without saying that only OSHA Recordable cases should be added to the log, but all too often, the person doing the recording is unsure whether a case is recordable or not and will error on the side of caution. Also, contractors should review their logs to make sure only cases involving medical treatment, and not first aid, are recorded. Resources for determining recordability can be found at http://www.osha.gov/ recordkeeping/. Escort injured workers to an occupational clinic, especially on initial visit, to help improve injury management from the start. While employers cannot dictate treatment, they can suggest options such as use of over-the-counter medications in place of prescription meds or butterfly bandages over sutures, glue or staples. In some cases 4
December 2012 Lockton Companies this type of interaction may mean the difference between a recordable case or not. Get to know your physicians at the occupational clinic, and do not be afraid to convey your company s strategies for injury management. Implement a return-to-work program to minimize the number of lost workday cases. Recording a restricted/transfer case is preferable to recording a lost workday case. While one does not want either case on their log, a restricted/ transfer case is considered less severe than a lost workday case and will help lower the LWDII rate. Educate those in supervisory positions on the benefits of an RTW program so they do not undermine your efforts in this regard. Contractors with operations in multiple locations might consider calculating their rates for individual branches. Consider an example of a contractor with branches in multiple cities across the Midwest and each branch bids work for its sales region. Contractors might find that the rates for the branch doing the bidding and performing the actual work are lower than the company as a whole. In this case, when submitting the incidence rate on a bid proposal, it makes sense to include only the rates for that branch. Note: it s important for contractors to be consistent when determining their rates in this fashion. 5
Contractors with multiple divisions (i.e., steel erection and rebar) might consider calculating rates for each division. As in the example above, if bidding a steel erection job, if the incidence rates for the steel erection division are better than the rebar division, some contractors may submit rates for just their steel erection division. Since the steel erectors will be the ones actually performing the work, submitting their incidence rates in the bid proposal would provide the owners/developers with a more accurate representation of the company s past safety performance. Again, consistency should be used when determining rates in this manner. Be sure to reference the correct NAICS code on the prequalification form (if applicable). The Bureau of Labor Statistics (BLS) surveys companies each year and uses the data to calculate incidence rates for industry groups based on the North American Industrial Classification System (NAICS). When submitting bids, contractors should select the correct NAICS code for comparison purposes. For example, a Building and Finishing Contractor who primarily engages in drywall work, but also provides painting services occasionally, may opt to choose NAICS 238310 for Drywall and Insulation Contractors with an average TCIR of 5.0 as opposed to 238300 for Building and Finishing Contractors with a TCIR of 3.8. For a list of current BLS Incidence Rates by industry group, go to http:// www.bls.gov/iif/oshwc/osh/os/ostb3191.pdf. Small- to medium-size contractors may want to highlight a three- or five-year average rate as opposed to a single-year rate. A potential problem with smaller contractors and medium-size contractors to some extent, is their rates for any given year may look worse than they actually are 6
December 2012 Lockton Companies simply because the total hours worked (the denominator) is not a very large number. Remember, the smaller the denominator, the larger the rate, with all other things being equal. Therefore, a single recordable case may cause the rate to jump significantly and have a negative impact on a contractor s ability to secure the contract. If this is the case, consider highlighting a three- or five-year average where possible. See example below: Year Total Cases Hours Worked TCIR 2009 1 214,000 0.9 2010 1 254,000 0.8 2011 4 260,000 3.1 3-Year Average 1.6 In summary: Implement injury/illness prevention strategies and industry best practices. When calculating Incidence Rates, be sure to include all eligible hours worked in the equation. Train those responsible for maintaining the OSHA logs on recordkeeping procedures. Escort injured workers to an occupational clinic, especially on initial visit. It cannot be stressed enough how important the OSHA Incidence Rates are to a contractor trying to secure a contract. Owners and developers have no choice but to select contractors most capable of getting the project completed on time and within budget. Whether it is right or wrong, the OSHA Incidence Rates provide them with a means to evaluate contractors. Adding to the problem is the economic downturn experienced in recent years in the construction industry. Contractors are eager for work and looking outside their normal service areas. This creates even greater competition for the same work. Improve your company s competitive advantage, and take the steps necessary to manage your OSHA Incidence Rates. Implement a Return-to- Work Program to minimize the number of Lost Workday Cases. Contractors with operations in multiple locations may want to consider calculating their rates for individual branches. Contractors with multiple divisions within one company may want to consider calculating rates for each division. Be sure to reference the correct NAICS code on the prequalification form (if applicable). Consider highlighting a threeor five-year average rate as opposed to a single-year rate. 7
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