By Chris P. Kaiser,
CSP, California State Compensation Insurance Fund
During these economically challenging times,
many organizations face important decisions that will impact the
infrastructure and future of their businesses. Many businesses seek
ways to cut cost in order to manage their operational expenses.
At the leading workers’ compensation
insurance carrier in California, State Fund’s loss control professionals see many employers
reducing their overhead in order to balance their budgets and simply
stay afloat. Unfortunately, the number one area that employers cut
is in their workforce. Layoffs in many
California
industries are at their highest level since the 1970s, just as they
are for the entire nation. According to the Department of Labor, job
losses are widespread across all major industry sectors. Those
companies that are not reducing their work forces are cutting
expenses in other ways. All employees will be impacted whether they
are laid off or not. For example, many companies have initiated
furloughs (days off without pay). Since February 2009, in California, all State employees were subject to taking two furlough days which
equates to a 9.2% pay reduction in salary. Though not tied directly
to the general fund of California, State Fund employees were subject to the furlough program as well.
Besides reduction of payroll and benefits, two
primary areas that we see employers cutting are safety-related
programs and employee training. This could be a dangerous move for
businesses looking to cut expenses.
Value of Safety
As business loss prevention consultants working for state and
provincial workers’ compensation carriers, it is incumbent upon us
to educate policyholders and brokers on the value safety have for
their business operations. Most employers look to layoffs as a last
resort in cutting expenses. Therefore, we must assist them by
illustrating the importance effective workplace safety programs have
on their bottom line. Safety and labor experts agree that it is
important for safety and loss prevention professionals to talk with
their clients about the financial benefits of initiating and
maintaining safe workplace programs. Of course, these conversations
should be held during non-recessionary times as well. It is vital
for employers to see the value that healthy and injury-free,
educated and experienced employees have on their bottom line. These
employees tend to be more productive which in turn increases
profits. As profits increase, so does job stability.
The Federal and many individual State and local governments
(perhaps the worst offenders on balancing budgets) are also seeking
ways to cut expenses and generate revenue to stay afloat. It is
important to educate employers that OSHA programs (at both the
Federal and State levels) are revenue generating agencies. Recently,
President Barak Obama approved an increase of $27 million to OSHA’s total budget to “meet its responsibilities to working
Americans under the worker protection laws it enforces.”
Enforcement agencies have increased staff. As a result, it should
not be a surprise if workplace safety violation citations increase
and employers will then be subject to paying fines. Of course, the
primary reason for issuing citations is to hold those employers
accountable for not maintaining safe places to work. However, it
should not go unnoticed that this would also be a means to produce
revenue for troubled governmental budgets. Safety and loss
prevention professionals must communicate the message to clients
that reducing the potential of OSHA fines and the costs associated
with workers’ compensation claims will help keep their business
stable.
Making the Economy Stronger
A primary focus in securing jobs has been to put stimulus
dollars toward our great nation’s infrastructure: roads, highways,
bridges, etc. Employers should view their safety programs as part of
their business’ infrastructure. Companies tend to focus on
production and forego safety when economic times are challenging.
Integrating safety programs into production will require adapting
business activities to economic realities, without compromising the
level of safety exposure. Focusing on the principles of safety
performance and empowering employees throughout the organization can
help businesses achieve safety excellence.
Hopefully, in the not-so-distant future, the
economy will right itself and consumer demand will return. The
businesses that have strengthened their organizational functioning
during the downturn will benefit. Businesses that will survive and
thrive these challenging times are those that secure their safety
management programs and take these times as an opportunity to
position their organization and its safety functioning for the
future.
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