A Strategic Approach to Workplace Safety: Improve Performance and Decrease Costs
By Hale Johnston Senior Vice President, Regional Manager, EMPLOYERS | December 19, 2010
As the hospitality industry prepares to close the books on another year, it likely will remember 2010 as a unique combination of improving fundamentals including revenue per available room (RevPAR) trends juxtaposed with continued economic uncertainty. Traditionally among the first industries to feel the adverse effects of economic downturn and recession, the hospitality sector also is among the first to show signs of stabilization and growth as the market reaches bottom and begins to recover.
Just as in past periods of economic recession, the latest downturn provided everyone in the business world with a stark reminder of how important it is to keep a keen eye on the fundamentals. And the hospitality sector is no different with regard to important fundamentals such as revenue management, cost control and customer service. Now, more than ever, hotel operators must continuously evaluate cost structures and work to enhance operational efficiencies amid a series of ongoing challenges.
Some commonly overlooked costs impacting hotel operators are those associated with workplace procedures and workers' compensation insurance, which is often misunderstood and frequently thought of in the same terms as other insurance products. With workers' compensation, businesses can implement practices that significantly reduce their costs, and create better operational efficiencies by improving workplace safety.
As background, workers' compensation insurance covers employers for their statutory and legal obligations for employee expenses that are a direct result of work-related injuries or illness. While plans differ within and among states, workers' compensation benefits can include weekly payments in place of wages and reimbursement for payment of medical and rehabilitation expenses. Depending upon the jurisdiction, hotel operators can obtain their workers' compensation protection from private insurance companies, state insurance funds, self-insurance or self-insured groups.
The Occupational Safety & Health Administration (OSHA) estimates direct workers' compensation costs alone run nearly $1 billion per week, which include workers' compensation payments, medical expenses and costs for legal services. And when indirect workers' compensation costs such as lost productivity, training replacement employees and equipment repairs are considered, the costs are multiplied exponentially. Whether direct or indirect, businesses ultimately bear the burden of these costs in the form of increased insurance rates, rising premiums and productivity losses.
For this reason, it is critical that hotel operators understand that a strategic approach to workers' compensation is just as important to cost savings as smart tax planning. Thus, hotel operators should maintain a long-term workers' compensation perspective focused on value, not just lowest cost. They should be sure their insurance carrier provides access to resources and value-added services that both protect their businesses today and also position them to potentially lower their workers' compensation rates in the future.