Measuring Success 2

January 6th, 2004 by

As I’ve said previously, a company that wants to have low workers’ compensation costs has to have effective ways to measure the performance of its safety and injury management efforts. In December, I wrote about the Cost of Losses per Full Time Equivalent Employees (FTE). Today, it’s time to talk about the Severity Rate.
In nearly all cases, time away from work drives the cost of losses more than any other determinant. This is why modified duty plays such a vital role in controlling costs. Therefore, the severity rate, which measures lost time, becomes the single best non-economic indicator of the overall effectiveness of a company’s workers’ compensation program. So, what is it, and how do we calculate it?
The severity rate is the number of days away from work due to workplace injury or illness per 100 full time employees (FTEs) per year. It sounds daunting, but the Department of Labor has made it easy to get and use this data.
For more than thirty years the Occupational Safety and Health Administration (OSHA) has required most companies to maintain what is called the “OSHA Log.” On this report, every workplace injury and illness is recorded along with the resulting time away from full duty, as well as time spent on restricted duty.
Every year, each company required to keep the OSHA Log sends a copy of it to the DOL, which includes it within a national database maintained by its Bureau of Labor Statistics. The BLS collates data from each Standard Industrial Classification (SIC Code) and publishes an annual national average rate of time away from work, or “severity rate,” for each SIC Code.
To calculate your severity rate, divide the total number of days lost due to occupational injury or illness by the total number of hours worked by all employees. Following this, compare your severity rate with the average for your SIC, published annually by the BLS. Remember, the average for your SIC is nothing more than the middle of the bell curve; it is neither good nor bad. You should set for your company a goal of maintaining a severity rate that is 50% less than your industry’s average.

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