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Basing employee rates on the cost of compensation claims has a negative impact on employee safety, according to John McKinnon, Executive Director, Injured Workers Clinic (IWC).

Raising costs was an idea that emerged in the 1980s, he added. Citing an academic report, McKinnon says that initially there was the idea that financial penalties could positively impact safety culture. The theory was that: “If we want to promote safety in the workplace, we should charge the employers if they’re having injuries and having claims costs. Claims costs should be a good indicator of health and safety practices.”

So, he says, the thought was that we influence health and safety by raising penalties for those who have high claims costs or claims that exceed a certain amount and giving rebates to people whose claims costs were lower. Nevertheless, doing this didn’t seem to actually bring about changes in health and safety practices.

“What we did see was that this triggered employer behaviour that was undesirable,” says McKinnon.

For example, employers started hiring lawyers to oppose claims by injured workers in order to keep their claims costs down. In addition, there was an increase in claims suppression and employers finding various alternatives to reporting.

Part of the IWC’s mission has been to highlight this problem.

“Basing employee rates on the cost of allowed claims creates a great deal of problems for the injured workers involved and the research shows that it doesn’t have any real significant impact on health and safety practices,” says McKinnon.