by Jessica Dale

How Can Contractors Afford to Not Put Safety First?


The bottom line is, you can’t. There are a number of reasons why safety should be your main priority.

First, you care for your employees and their well-being is of the utmost importance. They should leave the work site in the exact same condition they showed up.

Second, safety is more of a priority these days when companies are choosing which contractor to hire. There has been a cultural shift that has happened over the years. In the past, when companies would look at hiring a contractor for a job, they would look at quality and what the bottom line was, what it would cost. Now, the focus is more on safety culture and the safety record. Larger companies looking to hire contractors now recognize that if the company they are about to hire doesn’t have a good safety record and culture, they are likely more of a liability to them and therefore not worth doing business with.

This liability comes in the form of delays on the work site, greater potential for employees to take shortcuts resulting in less than desirable work, and potential for injuries. Ultimately, the job may cost more money because of unsafe work environments. In a day and age when companies want to get the most bang for their buck, they are going to look for a contractor that will provide quality in the safest way possible.

As a business, safety can have a huge impact on your insurance premium and the jobs you get. Not only does an insurance carrier often look at your policies and procedures in regards to the safety culture before considering writing the business, but there is an actual rate that is tied to the safety history of the company. This rate is called the Experience Modification Rate [EMR] and applies to the workers’ compensation policy. This rate history has now become a common request for contractors desiring to bid a job and any mod over a 1.00 [average] can possibly disqualify you to even bid the job.

The EMR is a factor that is derived from an equation that takes into account the prior three years loss history [not including the policy term you are in right now or directly prior] and the audited payrolls for those years. In short, this equation compares your workers’ compensation claims experience to other employers of similar size operating in the same type of business. If your company’s actual loss history is greater than the expected loss for the amount of payroll you have, the EMR will be greater than 1.00, and if less than expected, the EMR will be less than 1.00.

This rate is used in calculation of the insurance premium for the workers’ compensation policy. After the manual premium has been calculated [class code base rate x payroll/100], the EMR is one of the credits/debits applied in calculation of the final premium. If the EMR is greater than 1.00, your premium will increase by that factor. Likewise, if the EMR is less than 1.00, it will result in a credit on the policy. Since the EMR considers three years of loss history, a bad year will continue to hammer you for those three years, until it falls out of the range used in the equation of that factor.

In summary, having an EMR over 1.00 could not only mean being disqualified for bidding on certain jobs and missing out on revenue opportunity, but also increased insurance premiums, a double whammy.

Safety must ALWAYS come first, as a business, you can’t afford for it not to.

*At VAST, we project and analyze the EMR for our large workers’ compensation clients six months prior to the renewal where that factor will be used. This allows businesses to budget accordingly and also better understand the data the EMR is taking into account.

National healthcare open enrollment starts November 1st and ends on December 15th. To make an appointment with one of our trusted advisors please contact us at 906.228.7500.

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