Is the incident rate formula biased against small employers?

OSHA letter replies to employer question about Part 1904

Posted November 11, 2016

OSHA recently replied to an employer about a perceived bias against smaller employers in the formula the agency uses to calculate incidence rates of occupational injuries and illness. The employer wanted to know if there is a different, but more fair, benchmark that OSHA could use for smaller employers.

OSHA’s August 23, 2016, letter of interpretation, which was posted in early November, admits that: “A single injury or illness has a much greater effect on incidence rates in small establishments than on larger establishments. Any analysis must take this into account.” The letter went on to clarify the formula itself and suggest that employers use a number of variables, not just incident rates, to determine the effectiveness of their safety and health programs.

According to OSHA, “An incidence rate of injuries and illnesses may be computed from the following formula: (Number of injuries and illnesses X 200,000) / Employee hours worked = Incidence rate.” The 200,000 figure in the formula represents the number of hours 100 employees working 40 hours per week, 50 weeks per year would work, and provides the standard base for calculating incidence rate for an entire year.

OSHA explains that incidence rates take on more meaning for an employer when the injury and illness experience of his or her firm is compared with that of other employers doing similar work with workforces of similar size. Employers of all sizes should be aware that the Bureau of Labor Statistics (BLS) publishes incident rates by size of establishment in the following size categories:

  • Size 1 — establishments with 1-10 employees;
  • Size 2 — establishments with 11-49 employees;
  • Size 3 — establishments with 50-249 employees;
  • Size 4 — establishments with 250-999 employees; and
  • Size 5 — establishments with 1,000 or more employees.

These BLS quartile estimates are available on the BLS website.

According to OSHA, aggregation of multiple years of data can alleviate the unfavorable effect a single case can have on a small establishment’s incidence rate. The agency also explains that while incident rates and other injury and illness data is vital to hazard identification and abatement, employers should evaluate other variables, too, to judge their safety and health program. That’s because reliance on only one indicator can lead to wrong conclusions.

OSHA believes performance indicators should include both:

  • Leading indicators — These reflect the potential for injuries and illnesses that have not yet occurred. Examples of leading indicators include: level of worker participation in safety program activities; number of hazards and close calls/near misses reported, as well as amount of time taken to respond to reports; number and frequency of management walkthroughs; number of hazards identified during inspections; number of workers who have completed required safety and health training; and number of days needed to take corrective action after a workplace hazard is identified or an incident occurs.
  • Lagging indicators — These generally track worker exposures and injuries that have already occurred. Examples of lagging indicators include: number and severity of injuries and illnesses; results of worker exposure monitoring; and amount paid to workers’ compensation claims.

To read the letter, go to the OSHA website.

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