Company uses gain-sharing program to encourage employees to reduce workers' compensation costs.
Four years ago David Wenger, president and CEO of Eastern America Transport & Warehousing in Philadephia, decided to do something about his little corner of the workers' compensation crisis. "If we'd waited for the politicians to do something, we'd be out of business," he says. So he made reduction of workers' comp costs his employees' concern, using an informal gain-sharing program.
His $24-million company has 212 employees. In 1989 Eastern's experience modification rate, which indicates how a company's safety record compares with others in its sector and determines the premiums it pays, had reached 248% (100% representing the average).
Wenger established a bonus pool for each of the company's five divisions and announced that he would deduct $25 from the pool for every workday lost to an at-work accident. At Thanksgiving the remainder would be distributed as a cash bonus to all the employees in that division.
Wenger set each division's bonus pool at roughly 30% of the previous year's workers' comp premiums. Premiums in each unit reflect the risks of the jobs performed there, so the bonus favors blue-collar workers, who cost Eastern most. The pool for the first year totaled $48,000. Claims dropped 86%, and Wenger paid out $35,000 in bonuses. The premiums have continued to drop, but he hasn't lowered the bonus pool.
Workers are oblivious to the costs of workers' comp until they're educated, Wengrer says. Now it's in their best interest to learn. To help them, he provides information. Each employee receives an annual statement that details everything the company spends on him or her, including taxes, benefits, and perks. It also carries the company's modification rate, which now stands at 68%. "We've found a way to keep workers healthy," says Wenger.