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Strategic Human Resource Metrics: Safety & Workers' Compensation

Instructor: Nick Chandler
Making sure your employees are safe and healthy can be an expensive business. This lesson looks at the ways in which HR employees can check on health and safety as a means of improving the care of their employees and at the same time keep an eye on costs.

Health and Safety at Work

Health and safety involve ensuring the protection of co-workers, suppliers, employees, customers, and others who might be affected by the workplace environment. However, for Human Resource (HR) managers, employees are the priority. Even with the best intentions, accidents happen and the costs relating to health and safety need to be checked regularly. The following measurements or metrics are used by HR departments to keep an eye on health and safety in an organization.

Workers' Compensation Cost Per Employee

In many states, employment law makes it compulsory for most employers to have a Workers' Compensation policy. There are two costs for the organization for each employee: the cost of the insurance policy, or premium, and tax.

To get the figure for the tax we need to look at two funds: the Worker's Compensation Fund and the Death and Permanent Disability Fund. The tax payments to these funds are calculated as a percentage of the premium. The total of these two gives us the Workers' Compensation cost. If we divide this by the number of employees, then we get the average compensation cost or workers' compensation cost per employee, which can then be compared with industry averages.

Workers' Compensation Incident Rate

If there is an accident, then the employee will file a claim with the insurance company. The incident rate refers to the number of claims filed multiplied by the expected hours employees should work in a year; the total is then divided by the actual number of hours worked by employees in a year.

The expected amount of time worked is calculated using the number of employees multiplied by hours worked per week and the number of weeks worked (allowing for two weeks holiday). The OSHA standard rate is 200,000 expected hours based on 100 employees. For example, if there were 20 claims in a year and those 100 employees worked a total of 300,000 hours for the year, the incident rate is 20 x 200,000 / 300,000= 13.33. However, the OSHA also warns that small businesses with considerably less than 100 employees will need to calculate the expected hours according to their own figures.

Calculating the incident rate before and after health and safety training tells HR about the impact of the training on claims, and specifically on which types of claims. The rate can also be calculated by for each department to find out if some have more claims, or more of certain types of claims, than others. The Bureau of Labor Statistics has incident rates by injury and illness, industry, company size, and days away from work. These can be used by the organization as a comparison with their own figures.

Workers' Compensation Severity Rate

The severity rate is concerned with how serious the injuries or illnesses are. This rate is calculated by dividing the number of lost days by the number of incidents reported. This is important as an organization might have a low number of incidents, but as they are serious incidents, employees are off for longer periods of time. It is likely to cost the organization more to have five incidents a year with the employees off work for a month, than 20 incidents a year with employees off for a day or two.

Number of Documented Safety Violations

If everyone follows the rules for health and safety, then the number of incidents should be reasonably low. Whether on purpose or through ignorance, employees may not follow the rules from time to time, and this is referred to as a safety violation. Safety violations need to be reported, and the number of reports per year gives us the figure for this metric.

This metric is important as HR staff need to find out the reason for the employee failing to comply with health and safety rules. A high figure may indicate the need for employee training on health and safety, especially in cases where employers have had to pay penalties for breaking laws, such as the Occupational Safety and Health Act (OSH Act). In some cases, the employee may be disciplined for continuous safety violations and this metric may indicate certain sections of the organization where disciplinary policies need to be enforced.

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