Workplace injury and subsequent compensation claims is a growing problem. There is little doubt that over the years a lot of effort has been put in to avoiding the problem in the first place through better and safer work practices. But are companies and their boards really prepared if something does go wrong? Greg McCarthy provides some insights.
Workers compensation in Australia today is one of the single largest costs to business yet probably because it is not "core" business it is likely to be one of the most misunderstood costs to control. In NSW, despite significant reforms during the past 12 months to reign in the deficit (which before reforms, was projected to be $3 billion at 31 December 2001) it will still continue to grow, albeit at a slower rate, as premiums are capped at a scheme average of 2.8 percent of payroll. This 2.8 percent is still insufficient to fully fund liabilities for claims currently occurring in NSW. The one critical factor that often differentiates companies in effectively managing their workers compensation is the need for Senior Executives to take ownership of it.
Interestingly, many senior executives do not fully understand the key drivers of the cost of workers compensation in Australia. In effect there are three. They are:
• The company's wage roll
• The industry (tariff) rate
• The cost of claims
In effect, the cost of claims is the only cost driver that can be managed by individual employers. This can be done by either:
• Eliminating claims from occurring in the first place, no claims no claim cost, or
• Managing more effectively those claims that do occur.
In recent times, Australian workplaces have been more effective preventing workplace injuries however the cost of workers compensation has continued to spiral. The contributing factor to this cost explosion has come from an increase in the average cost of claims. When looking at the average cost of a claim, the largest component is the duration or payment for weekly wages. It should be no surprise that if employers are serious about effectively controlling the cost of workers compensation it is time away from work which should be the key focus of any strategy to manage claims. This sounds logical, but why is it that nearly all employers continue to experience a similar trend to of an increase in the average cost of claims? Quite simply, this increase is driven by increasing amounts of time away from work for individual claims. When you speak with the individuals within organisations charged with the responsibility for managing workers compensation claims or injuries about the concepts of early intervention, return to work strategies that include suitable duties, a focus on appropriate early active treatment, workplace support etc, etc, the response you invariably get is "we do all that".
However what is the most interesting aspect of this is that when you ask to see the documented procedures for how this occurs within the organisation and more importantly review existing cases, you invariably find that there is no organisational system and if there is one, it is not consistently applied. More often than not, you will also find many organisations, if they do have a system, do not hold their line managers accountable for their part in the process invariably rendering the process useless. Senior executives generally conduct reviews that would highlight organisational deficiencies to the core business activities that affect continued quality and therefore profitability. But do they review the appropriateness of and adherence to workplace systems that outline the practice for managing injury at work? Often organisations simply believe in what people say they do rather than being certain that they actually do what they say and that what they say they do is actually effective and appropriate for the organisation.
When you examine good business practice, it is critical to have a system that outlines the business operational activities and that these are communicated well to those who are expected to follow them. It should be no different for the way workers compensation is managed. There needs to be a well document system, that is communicated effectively and regularly to staff and management and that those responsible for the systems management are reviewed from time to time in the same way that other operational activities would be reviewed. It is imperative that those who have a key role in the process are held accountable by management for their role and this is measured in the same way that they would be measured for their performance in other key operational business activities. More often than not when costly claims are reviewed several months after the injury and one is left wondering why these people are still off work, closer scrutiny will show that in the very early days of the injury there was no intense workplace management of the injury. Concern and the intensity of claims management only occurred well after the horse had bolted.
Systems need to be in place to ensure effective management practices are in place early in the injury management process. If your costs for workers compensation are escalating or you feel you are simply just paying too much then it is time for closer scrutiny of your organisation's systems for managing workplace injury. Challenge what your people actually do and if they in fact do what they say they do. Look for consistency, how well the organisation understands what should happen and who should be involved. Most importantly make sure that what the organisation says should happen, happens consistently and as soon as possible after an injury occurs. And finally make certain that workers compensation and safety performance is a regular agenda item at board and senior executive meetings. Managers will manage what they know you measure them on.
* Greg McCarthy is managing director of Workplace Injury Management Services (WIMS), a director of NSW WorkCover and chairman of the NSW Workers Compensation Advisory Board
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