Business leaders across Alberta wrack their brains on a daily basis, struggling to answer the $64 question: How to generate profit growth in a crappy economy?
Let’s not pretend there’s an easy answer.
The majority of companies in Alberta already run lean. They’ve let people go, cut costs to the bone, rationalized every asset, and probably count every paperclip. Fleet services, cell phone plans, insurance coverage, and all other obvious sources of overhead long ago scrubbed for discounts and other cost savings.
These austerity measures are painful but usually necessary. Bearing in mind however, the risk that too much of this medicine could lead to overdose. By way of example, a quick way to immediately reduce payroll and benefit costs is to cut staffing levels. But to what end, if the understaffing leads to disability leave, high turnover, bitter attitudes, and diminished customer experience?
Key findings from a recent study on mental health in the workplace indicate that “close to three-quarters (70%) of respondents stated that their work experience impacted their mental health, while a higher number (78 per cent) reported mental health as the primary reason for missing work.” In particular, excessive workload due to understaffing was singled out as a prime cause of burnout and anxiety.
No well-adjusted business leader wants stressed out employees or a company culture poisoned by excessive austerity. But there’s almost no conceivable area of cost-cutting that doesn’t adversely affect employees one way or another. And so the business leader finds herself on the horns of a dilemma—damned if she does, damned if she doesn’t.
But there is one internal function that rarely gets a second glance from accountants: disability management (DM). Perhaps because, at first blush, DM appears to be a sunk cost. Or maybe it’s ignored because it’s viewed as an unavoidable cost of doing business, an uncontrollable expenditure. Sadly, these sentiments couldn’t be further from the truth. Disability management may indeed be the only cost-cutting measure that simultaneously bolsters the bottom line and enhances morale and culture.
Disability Management Unpacked
DM is the process of getting injured people back to work rapidly and safely, proactively reducing time-loss claims, and paving the way to discounted premiums while exercising legal due diligence. If you’re a small to mid-size employer, WCB premiums probably run you $75-200K/yr roughly speaking. Assuming your experience rating is average, you’re eligible for up to 40% discount (or greater if you’re in surcharge territory). Supposing your yearly WCB spend is $125K with an average experience rating, meaning that a 40% discount would equate to ~$50K in yearly savings. If you’re underwhelmed, keep reading.
When your DM program is firing on all cylinders, these best practices benefit occupational and non-occupational injured workers, meaning that your group benefit premiums will drop as well. For the sake of argument, let’s assume 3rd party benefits fall by about the same amount as the WCB cost savings. Now your yearly savings amount to ~$100K. Still not impressed? Keep reading.
Unless you’re in human resources or HSE, you’re likely not aware that WCB claims have become a cross to bear for safety and HR staff. Back in the 80’s and 90’s disability management was simpler and could be tacked onto anybody’s job description without much distraction. But WCB administrative burdens have since shot through the roof. Instead of spending their time preventing injuries and recruiting top talent, HSE and HR grapple with constant changes to WCB policy, struggle with complex and expensive injuries, and argue with the Board about accommodation and reinstatement. If you’re not convinced, stroll down the hallway and knock on their doors. Ask them how many hours they lose, in any given week, to WCB related tasks including:
- Corresponding with WCB case workers
- WCB reporting and other associated paperwork
- Keeping tabs on injured workers and ensuring they’re complying with WCB and company policy
- Interfacing with managers to ensure a coordinated and sustained return-to-work for the injured worker
- Recruiting and training new hires or temps to fill disability vacancies
- Counseling distressed employees who are suffering from depression, burnout, anxiety, bullying, etc.
- Planning modified-work plans for returning workers
If your company fits the norm, workplace disability is costing HSE and HR a combined total of 15-20 hrs/wk. Assuming this is the case, WCB distractions cost your company $35-50K/yr in lost productivity.
Other benefits that are difficult to quantify? Quicker returns-to-work, shorter claims duration, improved retention, less disruption to construction schedules and crew chemistry, better productivity, to name but a few. Implementing a DM program also demonstrates legal due diligence, especially important if you’re before a court or tribunal on allegations of human rights violations or constructive dismissal.
The final tally
In this example, you can look forward to adding $100K to your operating profit and liberating at least $50K/yr in constrained productivity. Your managers will appreciate seeing injured workers return faster and healthier, as will your customers who expect high levels of service delivered by familiar staff. Safety and HR will never be entirely free of disability-related tasks, but a proper DM program greatly alleviates their stress, leaving more time for injury prevention and recruiting the best job candidates.
Implementing a disability program can be quick, painless, and cheap. A conservative $100K injection to EBITDA could deliver a realistic 2-5% jump depending on the size of your operation. And in this difficult market, that’s nothing to scoff at.