Reducing Workers Compensation Costs

An ergonomics program in the workplace is a win-win for everyone involved.  Employees work comfortably and injury-free and employers save money through increased productivity and lower injury rates.  One of the ways employers save money is through a reduction in their workers compensation premiums.  Many state workers compensation programs have an Experience Modification Factor (also known as Experience Modification Rating, EMR, X-Mod, and Experience Modifier) that is put in place to reward companies who have little to no injury claims and to encourage companies with claims to improve their working environment.  The X-Mod is a multiplier to a company’s premium based on their 3-year claim and loss history with workers compensation compared to other companies that perform the same type of work.

Here is an example:

ABC Company

ABC’s Classification Code:  8390 (this is a code that every company is given based on the type of work they perform)

Classification Code rate per $100:  8.75% (this is the rate assigned to the classification code based on the workplace risk associated with that code)

ABC Payroll:  $700,000

Current Workers Compensation premium = $61,250

 

If ABC Company has a high injury rate, they will have a high X-Mod Factor:

Workers Compensation premium:  $61,250

Experience Modification Factor: 1.2

Premium will increase = $73,500

 

If ABC Company has a low injury rate, they will have a low X-Mod Factor:

Workers Compensation premium:  $61,250

Experience Modification Factor: 0.8

Premium will decrease = $49,000

 

As you can see, ABC Company can choose to save more than $10,000 per year with an ergonomically-friendly workplace or pay more than $10,000 per year with a workplace that causes injuries.  Ergonomic intervention typically costs much less on a one-time basis than it does to pay increased premiums each year.  Keeping the workplace safe and risk-free is definitely the way to go to keep costs down.

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