Controlling the cost of workers' compensation in construction: making the pieces fit

The costs related to workers compensation in the construction industry are rising every year, with no end in sight. Construction professionals can no longer afford to wait for others to solve the problem through new legislation or rate control. Controlling workers’ compensation costs is a puzzle that can be solved by contractors if they have all of the “pieces” and a guide. This thesis supplies the “pieces” by educating the reader on the terminology, intricacies, and problems of the workers’ compensation system. It also serves as the guide to solving the puzzle by discussing management techniques that are currently being used to control workers’ compensation costs, and their effectiveness.

Costs are not the only concern of construction professionals as they turn their attention to workers’ compensation. It is mandatory that every company that is eligible have an Experience Modification Rating (EMR) that is applied to its premiums to adjust for its actual insurance performance. The EMR has gained a new function, however. Owners are using the EMR as a prequalifier in bidding, suggesting that the EMR is an accurate predictor of a contractor’s safety performance. This assertion is not entirely true. This thesis addresses the inadequacy of the EMR as an indicator of safety performance and suggests alternative measures of a contractor’s safety.

The management techniques cited, and the assertions made with regard to the EMR, in this thesis are based on the opinions of the forty-two (42) contractors and over one thousand six hundred (1600) construction workers who participated in a study conducted by the Construction Industry Institute’s (CII) Workers Compensation Task Force. The findings of this thesis were made a part of the task force’s CII Source Document.