Metrics: Quiz Part 2

Hint

– The cost per FTE formula is: (Incurred Losses x 2,000) / Man-Hours

– What is included in Incurred Losses?: Incurred Losses includes the amount that was paid for a claim, amount reserved for a claim, and any expenses.

– Why 2,000? 2,000 is the number of hours a full time equivalent employee works in one year. Using this number helps to give a apples-apples comparison to account for part-time, seasonal, and other workforce variances.

– Does it include the premium paid? If you are in a guaranteed cost program, use Premium Paid as your incurred loss number in the Cost Per FTE formula. If you are in a high deductible or self-insurance plan, use actual incurred losses.

– Where do you find the Incurred Losses information to run the formula? The simplest way to find the information for incurred losses is to request your current and prior year loss runs are exported in excel format. Simply take Paid, plus Reserve, plus Expenses.  For a more accurate apples-apples comparison year-year, request that your loss run numbers are “point in time”  with loss development valued as the same date each year. exp. December 31st each year for the past 3-4 years.

– Where do you find the Man-Hours information to run the formula? This number is typically stored and accessible in HR payroll records.  The number should include all full-time, part-time, and seasonal workers.

Hint

There are 4 uses that make the cost per FTE come alive:

– Compare to the RIMS Benchmark Survey: This survey is published annually and contains cost per FTE benchmarks by industry including retail, technology, manufacturing, etc. Compare your number to the industry benchmark to learn if you are in the top, middle, or bottom third of your industry. This will give you a general idea of where you stand.

– Compare to your own company by period and division: The most meaning from the FTE calculation will come by comparing to your own company to track progress, as well as variances between divisions. This number should be tracked at a minimum annually, but can be done as often as quarterly.

– Worst to Best List: When you track the cost per FTE by division, you will have the ability to leverage peer pressure to motivate compliance with your workers’ compensation best practice.  This is accomplished by publishing and bring attention to a worst to best list. The person at the top of the worst list is not going to want to stay there.

– Savings To Date Calculation: Once a workers’ compensation management program is up and running, the most important metric to track is the Savings To Date Calculation, or Cost If We Hadn’t Improved.

Hint

– The first thing to note when comparing period 3 to period 1 (if the organization didn’t improve), you can see the employee count grew by 1,200 employees. (Look at FTE Count, 2nd table down, Corporate Total Column) In period 3 the total premium is HIGHER than in period 1. (Look at Total WC Cost, 3rd table down, Corporate Total Column) It is easy for workers’ compensation improvements to go unnoticed when the total premium has increased due to an increase in employee count.

– A modest 15% corporate improvement has saved the organization $204,600 with likely very few additional resources or funds invested. (Look at Savings to Date/Cost If We Hadn’t Improved, 4th table down, Corporate Total Column, calculated as ($224-$191)*6200 = $204,600)

– Division 3 has cut workers’ compensation costs by 37%, is the smallest division, and is responsible for almost half of the organization’s workers’ compensation savings. ($91,000 compared to $204,600 – Look at Savings to Date/Cost If We Hadn’t Improved, 4th table down, Division 3 Column)

– If the entire organization was able to follow the same changes as division 3 to realize a 37% reduction, the savings would be $513,856 ($224 per FTE x 37% savings = 82.88 in savings per FTE. 6,200 employees x 82.88 = $513,856) (Look at Cost Per FTE, 1st Table, Column 1, Row 1; Look at FTE Count, 2nd Table Down, Column 1, Row 3)

– A common route to successful workers’ compensation roll-out is to focus on one small division, experience success, and roll out the program to the rest of the company.

Hint

The point of the Incident Rate metric is to be a comparison tool regarding the number of incidents a company has on a per-period basis. This information is tracked by OSHA nationally and is a reliable benchmark to compare a company to its industry peers.

The second point of comparison is the company comparing itself on a location by location and period-period basis.  The need for safety improvements can be identified at the establishment location for safety planning purposes.  Safety improvements can then be tracked by location and by period.

– How is TRIR calculated?

(# incidents x 200,000) / work hours

– What is included in work hours?

Include hours worked by salaried, hourly, part-time, and seasonal workers, as well as hours worked by other workers subject to day-to-day supervision
by your establishment (e.g., temporary help service workers). Do not include vacation, sick leave, holidays, or any other non-work time, even if employees were paid for it. If your establishment keeps records of only the hours paid, or if you have employees who are not paid by the hour, please estimate the hours that the employees actually worked.