For construction businesses, workers’ compensation insurance is a must-have. Unfortunately, because of factors such as inflation and labor shortages, the cost per claim has generally increased industrywide in recent years.
It may seem like there’s little you and your leadership team can do to manage these rising costs. But there remain various ways to lessen the likelihood that you’ll get hit with a catastrophic claim or a series of smaller ones.
Clear and present danger
Frequent or notably expensive workers’ comp claims can compromise your construction company’s financial stability in many ways. Risks include:
Additional costs and expenses. When a worker is injured on the job, your business may be liable for that individual’s medical expenses, rehabilitation costs and lost wages.
Rising insurance premiums. Recurring or particularly costly claims may provide your insurer with the rationale to increase the amount of your premiums.
Diminished liquidity. Outflows for medical bills, disability payments, high insurance premiums and legal expenses can slow cash flow.
Depleted reserve and greater liability. A common practice for construction businesses is to create a cash reserve for anticipated workers’ comp claims. Such a reserve is reflected on your balance sheet as a liability. As claims costs rise, you may need to set aside a greater amount of funds to replenish the reserve — thereby generating a bigger liability.
More arduous reporting and potential compliance issues. Workers’ comp claims mean copious paperwork, which puts the pressure on you to document everything properly and in a timely fashion. Failure to accurately track claims and report them to the relevant authorities can even lead to monetary penalties and legal issues.
Safer jobsites are the key
There’s one thing about managing workers’ comp costs that hasn’t changed over the years: The safer your jobsites, the less vulnerable you’ll be to claims. Here are some best practices to review and follow:
Conduct continuous safety training. Naturally, safety training should be part of orientation for new hires as well as a consideration in every project’s preconstruction process. But don’t stop there. Urge your crews to start each workday with morning safety huddles or advise them to take a break in the afternoon for “toolbox talks.” Topics might include working safely in cold or hot weather, proper lifting techniques, or other more job-specific concerns.
In addition, offer specialized training — and certification, when required — for particularly dangerous tasks such as operating heavy machinery, working at heights or handling hazardous materials. Stay apprised of the latest standards set forth by the Occupational Safety and Health Administration (OSHA). Ensure employees undergo annual OSHA training. Look into what resources the agency offers.
Provide optimal personal protective equipment (PPE) and mandate its use. Ensure everyone on your job sites has access to high-quality PPE, including but not limited to hard hats, boots, goggles, hearing protection, gloves, vests and fall protection devices. Have a process in place to regularly review and update the PPE provided. Above all, be sure to enforce the rules for using PPE with no exceptions.
Schedule regular safety inspections. Performing routine inspections will increase the chances that you’ll catch potential hazards, correct them and ensure overall compliance with safety protocols. Assign trained personnel to inspect equipment, scaffolding and work areas regularly to mitigate risks and prevent accidents.
Leverage technology for safety monitoring. If you haven’t already, install internet-connected cameras and let everyone know they’re there. Doing so can motivate workers to follow safety protocols and provide evidence when and if something goes wrong.
Explore the use of other tech tools as well, such as wearable devices or sensors to monitor workers’ movements, environmental conditions and equipment usage in real time. These solutions can provide early warnings for potential hazards, allowing for proactive interventions.
Implement an emergency response plan. Develop a comprehensive plan to follow should an accident or other safety-related incident occur. Train employees on essentials such as communication procedures, evacuation routes and first aid. Regularly conduct drills to test the readiness and effectiveness of the plan.
Excel at documentation. Ensure project managers and supervisors keep daily logs and other reports. If something happens that could trigger a claim, generate the required documentation as soon as possible. Include photographs or even video, if feasible. Collecting evidence in a timely manner can mean the difference between a manageable claim and a major one. Doing so can lessen the likelihood or impact of litigation, too.
Track workers’ comp costs over time. Be sure your construction company’s accounting staff is tracking all costs associated with your workers’ comp coverage. This includes payments to your insurer, health care providers and attorneys. You want to get a sense of how much of a problem workers’ comp costs really are so you can develop and execute the right strategies in response.
Cultivate a culture of safety. Construction businesses with safety-focused cultures — from the top down — tend to have an easier time managing workers’ comp claims. Be sure everyone on the leadership team, including project managers, follows safety protocols to the letter. When workers see higher-ups skirt the rules, they’re more likely to cut corners as well.
Regularly emphasize the importance of safety in company communications. Recognize and reward employees who contribute to maintaining a safe work environment. Champion collaboration and teamwork in identifying and addressing safety concerns.
Two-pronged approach
To sum up, managing workers’ comp costs is possible by taking a two-pronged approach. First, gather and track the pertinent data involved so you know how these costs are trending. Second, implement and adhere to rigorous safety policies and practices. Contact our firm for help analyzing your coverage and claims costs and developing optimal strategies for containing them.
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