As advocates of disclosing the costs of employee benefits to the employees, workers’ compensation premiums are often ignored. Why? It’s difficult to give a specific cost per employee since the premium is part fixed cost and part variable to their wage.
Employees are poorly educated in the area of how much money is available for payroll, or more broadly, remuneration. The entire conversation about production versus remuneration can be boiled down to they need to bring in more money than they cost you. That’s understandable. How much more money in excess of their paycheck is more difficult to comprehend.
For the sake of this discussion, assume all workers’ compensation is ten percent of payroll. With preferred rates and experience modifications, that can vary between 8 and 12%.
Your employee must learn that safety and claims puts up to 4% of their paycheck at risk. Companies with excellent safety records and low claims have more money filter down to paychecks, and still remain price competitive.
It’s a hard lesson for employees to learn. If an employee earns $25 per hour, they make about $50,000 per year. Safety and low claims can free $2000 per year for additional payroll? Over the long run, the answer is yes. And, it’s a good policy to bonus employees in this way. Even if some of the long-term savings are used to match 401K contributions, or some other safety benefit idea.
The most important rule is: have this discussion. Safety equipment, protection or processes may cost money, but injuries cost more. If employees support the safety culture, less money is spent on injuries so more can be spent on remuneration. It is a long-term process, several years to accumulate savings and gain an historical confidence in the culture.
Workplace safety can be the most important employee benefit in their plan. They definitely help control the costs and actively gain other employees participation.