Like materials, your lease, and taxes, workers’ compensation insurance is a necessary and unavoidable operating cost for your business. That doesn’t mean it’s an altogether fixed cost.
To calculate what your organization pays, an insurer first calculates your manual premium, then multiplies that by your experience modifier. Thus, there are two general methods for lowering your workers’ comp costs: lower your manual premium, or lower your ex-mod.
From an operational perspective, lowering your manual premium is the much more difficult option of the two. Remember, your manual premium is determined by payroll, location, and the kinds of work your employees perform. In order to change this number, you would need to cut workers’ pay, relocate your company, or start another business entirely.
Your ex-mod, meanwhile, is a multiplier based on your organization’s environmental health and safety performance. It can have a positive or negative impact on your premium. If your organization has better EHS outcomes than your competitors, you get a discount on workers’ comp insurance. If you do worse than your competitors, you pay a higher rate.
In other words, lower your ex-mod and you’ll lower your premium.
Here are a few practical ways to do just that: