Controlling workers’ compensation costs begins at the top; manufacturers are wise to treat workers’ compensation costs as a controllable expense that is managed with prevention, education, and a concrete action plan — both before and after accidents occur.

Risk management programs help outline potential risks in the workplace, and workers’ compensation coverage helps make things right after a workplace injury. Learn more about each of these important factors for your manufacturing business.

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What is Workers’ Compensation?

Workers' compensation, or workers' comp, is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer due to negligence.

Workers’ comp can protect your business and your employees by helping cover:

  • Missed wages if your injured or ill worker needs time off from work while they recover.
  • Medical expenses to treat your injured or ill employee.
  • Vocational rehabilitation if your worker needs ongoing care to help them get back to work.
  • Death benefits, like funeral costs, if a worker passes away in a work-related incident.

Each state is in charge of its own workers’ compensation program. This means state laws for workers’ comp can be different depending on the location of your business. For example, California law says every person and apprentice working for an employer must have workers’ compensation coverage. This includes employees with oral and written agreements and includes lawfully or unlawfully employed workers. California doesn’t require children and spouses to have coverage. It also doesn’t require coverage for:

  • Deputy sheriffs
  • Volunteers
  • Amateur sports officials
  • People working in exchange for aid or food

What are Manufacturing Risk Management Programs?

A risk management program is what puts a manufacturing organization’s risk management plan into action. A risk management plan ensures that an organized roadmap that objectively identifies risk is created; this prevents essential risk elements from being forgotten, which can be detrimental over the long-term. 

In a manufacturing organization, consideration needs to be given to the potential risks associated with ongoing, routine activities. For example, risks can arise due to the nature of the materials in use, the equipment, the people, etc.

Therefore, it’s important to have a program in place to understand the probability of the risks arising and the potential impact on the business, the staff, the shareholders, customers, suppliers, and the community.

The focus of a risk management program can be to address a number of audiences and intentions. The goal can be to minimize injury to staff, to customers, or the local community; alternatively, the focus may be financial, where the financial health of the business is a key concern or the potential impact on shareholder financial returns. 

Many manufacturing organizations place a high focus on reputation, so any potential damage to business reputation could have long-term effects. Therefore, the risks which could impact the reputation of the organization need to be identified and controls implemented to minimize the potential of such risks being realized.

workers' compensation

Best Practices for Manufacturing Employee Safety

Your workers are your most valuable assets on the manufacturing floor; take these foundational steps to encourage and promote best safety practices:

Educate Workers on the Hazards

The number of hazards on a given manufacturing floor is significant - ranging from mechanical hazards to electrical, work processes and training, to distractions and human error.  All can result in risks or injuries to employees. Identifying these hazards in your operation can help you prepare an effective safety and preventative program.

Implement Orientation and Ongoing Training and Certifications

Mandating new employees to attend a comprehensive orientation session to be conducted by a trained safety instructor benefits the employee and your manufacturing organization.

By ensuring new employees understand their responsibilities in maintaining good safety practices, the chance of an accident occurring from ignorance is greatly reduced. After all, ​​since 1970, workplace deaths have been reduced by more than 60%, and occupational injuries have declined 40% due to heightened safety training measures.

Have an Emergency Action Plan

An emergency action plan is an essential element to have prepared in advance so that your organization is prepared in the event of major emergencies. Employees should know what to do during a given emergency. Total or partial evacuation may be necessary depending on the gravity of the situation.

For example, in case of fire, a fire alarm system should activate emergency response teams to perform their assigned duties. In the event of a bomb threat, toxic substance release, or hazardous weather, etc. a public address system should notify all concerned to take the appropriate measures to protect life and limb.

Implementing Effective Workers’ Compensation Programs

When the risk management team identifies potential risks, they will then need to identify the appropriate actions to address each risk. These actions should be agreed upon and implemented as swiftly and thoroughly as possible.

When implemented, there will be a need to verify the effectiveness of actions taken to ensure no gaps were missed along the way. The risk plan and risk measures then need to be updated to reflect any product or process changes and resultant risk levels.

Those in charge of risk management will need to continually monitor the effectiveness of the actions taken and continually update the risk plan.

How to Plan for Controlling Costs

1. Focus on Training and Education 

Proper job training will help ensure safe work habits. Accomplish your training goals with regular safety training sessions, meetings, and other workplace communications. Above all, training efforts should convey the importance of workplace safety. In addition, educating supervisors and managers is equally important; investing a few dollars in management training could help you control workers’ comp costs to the tune of millions of dollars (in a worst-case scenario).

2. Communicate with Injured Employees

Don’t leave communication up to other employees, friends, or attorneys. Rather, stay connected with injured employees so they know that someone cares about them. Injured workers need to continue to feel connected to the organization and motivated to return to work.

3. Report Injuries Promptly

Immediate reporting of injuries helps with speedy payment of bills and lost wages. Reports should be filed as soon as managers or supervisors become aware of an incident. Investigate incidents thoroughly and take corrective action; the only way to prevent future injuries is to thoroughly root out the causes of the ones that do occur and to take steps to prevent them and others like them.

4. Reduce Lost Time and Accommodate Injured Workers

While you cannot prevent all injuries, you can work to reduce the real workers’ compensation cost drivers: severity and length of absence. Get injured workers back to work quickly by maintaining ongoing communication. Closely following all established post-injury procedures will ensure that injured workers get back on the job promptly.

Use modified duty as a bridge to get workers back to full employment. Modified duty keeps workers active and part of the team by focusing on what they can do rather than on what they cannot do.

manufacturing risk programs

How to Manage the Workers’ Comp Claims Process

These steps are essentially how a workers’ compensation claim process breaks down:

Step 1: Employee Reports Incident – Workplace Injury

The employee informs the employer that a workplace injury occurred; they visit a healthcare professional for a medical assessment and treatment.

Step 2: Manager Files Incident Report

The manager or supervisor of the injured employee completes and files an incident report to start the process of documenting the incident. Furthermore, they must get it signed by the employee, as well as any witnesses. The report includes factual details such as date, time, and location of injury; personal details of the employee involved; nature and severity of the injury; and details on how the accident happened.

Step 3: HR Documents Official Insurance Claim

HR files an official claim on the employee’s behalf; the claim will go to the company’s insurance provider and the state’s Workers’ Compensation Agency Office (WCAO).

Step 4: HR Conducts an Investigation

The human resources team conducts an investigation and interviews all key witnesses, taking into account regulations from the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA). 

Step 5: Monitor Employee Progress

In the event an injured worker is unable to perform their duties, HR or occupational therapy departments maintain regular contact with the employee to monitor their progress and anticipated return to work date. HR must also provide training once the employee returns to work if required.

Step 6: Compensation Settlement

The state WCAO determines if a claim is successful or if further investigations are required. If comp settlements are refused, employees can appeal to the WCAO.

Learn More About Risk Management and Workers’ Compensation with CMTC

If you want to boost your manufacturing safety program, consider an evaluation of your company’s quality standards and requirements as a starting place. If safety isn’t your number one priority, you may need to reevaluate your processes standards and policies.

Whether it’s automating your security systems or educating workers on workplace hazards, know that safety requires ongoing efforts and dedication to the highest standards of excellence. It’s important to be adaptive when looking at safety controls and be willing to reevaluate steps in your process if need be. After all, you’re implementing safety so day-to-day manufacturing operations remain safe.

CMTC’s team of qualified consultants is made up of diverse backgrounds and skillsets to provide the knowledge necessary to overcome almost any issue faced by California’s manufacturing community. CMTC specializes in technical assistance, workforce development, and consulting services for small and medium-sized manufacturers. We can help you implement industry best practices in your company.

For more information on CMTC’s services or to reach out to one of our manufacturing experts, contact CMTC today.

About the Author

Eliot Dratch

Eliot Dratch is a quality, lean and safety consultant who understands that U.S. manufacturing has been the economic engine that raised the living standards and built economic equity for the last 6 generations of Americans. Eliot’s work with manufacturers for his entire 30+ year career from different manufacturing sectors allows him to leverage a unique blend of experience for his clients. His goal is always to measurably improve a CMTC client’s productivity, safety and profitability.

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