Lower Workers’ Comp Insurance Costs: 5 Tips for Restaurants

Key takeaways:

• Workers’ compensation insurance costs are within your restaurant’s control.
• To reduce workers’ comp expenses, start by identifying your biggest claim cause. That’s where you want to put your efforts.
• Statistics show delayed claim reporting can lead to higher costs and prolonged employee recoveries.
• Greater attention to the claims reporting process, safety practices, employee training, return-to-work programs, and data analysis can help improve your profitability.

While workers’ compensation insurance premiums decreased for some industries last year, many restaurants faced increases — 30% to 40% in some locations. The silver lining? Workers’ comp costs can be one of the most controllable expenses in your business. Here’s how you can take charge.

Factors influencing workers’ comp insurance pricing

Worker’s comp premiums depend on:

• Your overall payroll figure
• The standard rate for hospitality class code 9079, which has gone up in many states
• Your experience modification (X-mod) factor

Mandatory increases in minimum wage, along with stiff competition for top talent, are putting upward pressure on restaurant payrolls. Since workers’ comp pricing is a function of payroll, a larger payroll means higher workers’ comp premium.

The standard rates by class code are not something you can influence. Some states have divided 9079 into subcategories with different rates, which also can contribute to workers’ comp premium increases.

In contrast, the X-mod factor is within your business’s control. It reflects your history — how your specific restaurant performs.

What is an experience modification factor?

Your X-mod is a numerical value that reflects your organization’s claims history compared to others in your industry — a performance benchmark. A mod of 1.0 represents the industry average. A mod above 1.0 means your organization is experiencing more claims than your peers. And a mod below 1.0 reflects fewer-than-average claims, which can translate to lower premiums.

Your workers’ compensation record stays with you for at least five years, if not more. For example, after the pandemic, some restaurants struggled to find staffing and hired workers with less hospitality experience. Inadequate training of those team members led to accidents and injuries in some cases. Even though the pandemic is in the rearview mirror, your X-mod factor may still reflect those claims.

Hiring, training, safety practices, and the way you handle workers’ comp claims are within your control. As part of your restaurant risk management strategy, here are five actions you can take today to reduce your X-mod factor.

1. Implement best practice safety programs

Start by asking, “What safety programs do we have, and what safety programs are missing?” Also, look at your recent claims and identify your biggest issue. How are people getting hurt? That’s where you want to put your efforts.

The most common incidents among restaurant workers are:

• Slips, trips, and falls
• Lift, push, or pull injuries
• Cuts and burns

Are you developing strategies around these topics? As a starting point:

• Ask your frontline employees in the kitchen what safety issues they see in their day-to-day work. What ideas do they have for making the kitchen safer?
• Conduct regular walkthroughs of your facility to look for hazards. Invite employees from other parts of your business to walk through your kitchen. Your bookkeeper, known for attention to detail, may spot risks others have overlooked.
• Identify simple changes you can make to reduce risk, such as installing a drain, adding floor mats, or repositioning equipment.
• Incorporate a written injury prevention program into your safety training.

2. Manage workers’ compensation claims proactively

If a claim occurs, the way you handle it can affect the overall cost. Make sure to:

• Report incidents promptly (within 24 hours; sooner is better).
• Make sure the employee gets the care they need immediately.
• Tell management as quickly as possible.
• Document what happened in detail.

Your workers’ comp insurer may have a triage resource. An employee can use it at the time of injury to help find the right medical support from the start. In some cases, basic first aid may prevent an emergency room visit. (For severe accidents, call 911.)

Show support

Employees may fear they will lose their job if they have an injury. So, you want to communicate, through your words and actions, “We’re here for you.” For example:

• Have a manager accompany the injured employee to the initial medical evaluation to provide reassurance and practical support. Be part of the care team from the outset.
• Assign someone to check in with the employee while they are out. Call or text to say, “Hey, we miss you. How are you feeling? Do you need anything? Can we send food to you and your family?”
• Monitor the claim to make sure the employee is getting the care they need and not experiencing friction with the insurance carrier. Incorrect paperwork submissions can result in treatment delays.
• Understand that no one wants to get hurt. For most employees, missing work is scary and detrimental to their mental health. Reassure the employee often that their job is secure, and the team is looking forward to the employee returning at full strength.

If an employee’s care hits a glitch, get involved. Demonstrating support in tangible ways builds trust and can help reduce litigation risk.

The first 24 hours are the most critical for achieving the best claim outcomes

Statistics show delayed reporting can lead to higher costs and prolonged employee recoveries.

While details are still fresh, interview witnesses and write down information thoroughly. Look carefully at the area where the accident occurred. Is there a quick fix to prevent a similar incident?

3. Engage in continuous employee training to enhance workplace safety

Sometimes, in the quest to meet customer demand, restaurants skimp on employee training.

Pause and reflect on your onboarding process. Is it rushed? Is your training like “dry toast” — a boring checkbox activity that employees dread? Consider these alternatives:

• Make training engaging and practical. Use real-life examples related to your employees’ daily tasks. Consider involving them in simulations, so learning is memorable and actionable.
• Add QR codes to equipment, which link to video-based tutorials. If an employee needs a refresher on proper equipment use or maintenance, they can get it in real time.
• Invite experienced staff to share their expertise with team members. Some restaurants are making their own training videos, starring employees.
• Get creative. One chef, who was previously a firefighter, arranged a team event at fire station. He taught co-workers how to use a fire extinguisher, and everyone got hands-on practice.
• Communicate your findings from past incidents so your team can learn.

Good training does not need to be expensive. Keeping safety top of mind on a continuous basis can make a positive difference for your bottom line.

4. Develop innovative return-to-work programs

Time loss is one of the biggest cost drivers in a workers’ comp claim, yet many restaurants struggle with knowing how to bring an injured employee back to work. Here are some tips:

• When you accompany your employee to the initial medical evaluation, share a document with the provider that says, “We are a return-to-work employer with return-to-work options.” Set expectations up front that you implement role modifications to assist the employee in easing back into work after an injury.
• You help the injured employee feel supported when you communicate you have programs in place to ensure they can return to work. They can focus on healing instead of worrying about potential job loss.
• Think about what the injured employee could do in the short term to create lasting value for the organization. Could they be a greeter? Could they help with office work, create employee training, or document procedures? Collaborate with healthcare providers to identify accommodations that align with medical restrictions.
• Some states, like Oregon, offer incentives to offset wages for employees in modified roles, further reducing costs.

When the injured employee returns, make them feel important and missed: “Good to have you back! The team wasn’t the same without you.”

Also, do a walk through to show all employees what happened and the changes you are making in response. Showing employees the immediate and impactful solutions the restaurant implemented highlights that you care about your workforce and their safety.

5. Leverage workers’ comp data and technology

Data is power. Are you using it to manage claim costs and improve health outcomes?

• What information are you tracking?
• How quickly are you reporting claims?
• Do you have time loss claims? Why?
• Has there been a change in claim severity? Or frequency (which can breed severity)?
• Are you experiencing more or less claims than your peers?
• What types of injuries are you seeing?
• Do the injuries vary by location?
• Are most losses at one location? Or are they spread out across several?

Studying your data helps you pinpoint trouble spots, so you can implement the right fixes. Suppose multiple employees have sustained injuries from slipping on the floor. Do you know why? Is the flooring itself a problem? Or the cleaning solution you use when mopping? Or employees’ footwear? Data helps inform your risk mitigation strategies and safety training. The fix might be a well-placed mat that could save you thousands of dollars.

Evaluate your workplace culture as part of restaurant risk management

Workers’ comp provides a “window” into an organization’s culture. If you have a high X-mod factor, explore whether cultural issues may be contributing to workplace injuries.

Do some of your employees work two or three jobs to make ends meet, meaning they are tired? Are you chronically understaffed as you manage your margin? Do you screen for “caring” when you’re interviewing candidates? An employee who cares about others and cares about doing a top-notch job likely will operate in a safer manner than someone who’s merely punching a clock for a paycheck.

Fostering a safety culture that puts employees first can prevent claims and improve morale. Little actions can have a big impact on your employees’ experience and the overall cost of workers’ compensation.

Want to learn more?

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Connect with the Risk Strategies Hospitality team at hospitality@risk-strategies.com.

This article recaps a recent webinar: Workers’ Compensation: Reducing Expenses in Hospitality.