How to Reduce Your Janitorial Company’s Ex-Mod

Is your janitorial company paying too much for workers’ compensation insurance? The issue could come down to your ex-mod. Reducing your janitorial company’s ex-mod is one of the best ways to bring down costs, and it could also support your worker recruitment, engagement and retention goals.

How Does Your Janitorial Company Compare?

Janitorial work involves some risks. Cleaning crews are often working with hazardous chemicals, and they are involved in physical labor that could result in back injuries and slip-and-fall incidents. They may also be working alone at night, potentially putting them at risk for violent crime. Taken all together, it’s reasonable to assume that janitorial companies will have higher workers’ compensation claims rates than very low-risk industries, such as accountants. However, the claims are likely to be lower than they are for very high-risk industries, such as construction. Workers’ compensation premiums use class codes to reflect this.

However, this is only what’s expected. Your particular janitorial company may have an excellent safety record and almost no worker injuries. Alternatively, your janitorial company may have far more worker injuries than other janitorial companies of the same size. That’s where your ex-mod factor comes into play.

What Is the Ex-Mod in Workers’ Compensation Insurance?

The experience modification factor, or ex-mod for short, is a figure often used in workers’ compensation premium calculations to account for an individual company’s loss history relative to the loss history of similar companies. A good ex-mod will bring your rates down, while a poor ex-mod will raise your rates.

For a more detailed understanding, it’s necessary to know a little about how workers’ compensation rates are calculated. The typical formula multiplies three factors to arrive at your premiums:

• Your annual payroll divided by 100
• Your class code rate
• Your ex-mod

The inclusion of your annual payroll means that companies with more employees or higher paid employees pay more for workers’ compensation insurance. The inclusion of the class code rate means that companies that employ workers in high-risk positions also pay more. Finally, the inclusion of the ex-mod means that companies with a poor loss history pay more.

What Is a Good Ex-Mod?

A neutral ex-mod is 1.0. Multiplying any number by 1.0 does not change the number, so an ex-mod of 1.0 does not change your premium. Your company may have an ex-mod of 1.0 if your company’s loss history is exactly average for similar companies or if you just don’t have enough claims history to calculate an ex-mod, for example, because your company is new.

An ex-mod of above 1.0 is poor because it will raise your costs. The higher the number, the steeper the rate hike. For example, if your annual premium is $100,000 before the application of the ex-mod, and if you’re ex-mod is 1.2, it will increase your workers’ compensation premiums to $120,000 (calculated as $100,000 X 1.2).

An ex-mod of below 1.0 is good because it will lower your costs. The lower the number, the better. For example, if your annual premium is $100,000 before the application of the ex-mod, and if your ex-mod is 0.5, the ex-mod will reduce your workers’ compensation premiums to $50,000 (calculated as $100,000 X 0.5).

How to Reduce Your Ex-Mod Factor

The ex-mod factor should be empowering. It gives companies a direct way to reduce their workers’ compensation premiums and control their overall costs. However, if you currently have a poor ex-mod factor that’s raising your rates, you probably don’t feel happy about it. The good news is that you can lower your ex-mod factor and your rates – it will just take a little time.

Your ex-mod factor is typically based on three years of claims history. If you start improving your injury rates now, it will pay off in the coming years. Worker injuries are also bad for workplace morale, so reducing injuries may help you boost worker satisfaction, and that can help with recruitment, engagement and retention.

Here’s what you can do:

• Adhere to all relevant regulations and best practices for janitorial companies, including OSHA standards for cleaning services.
• Train your workers on all safety procedures and the importance of following them.
• Implement controls for the biggest risks. Review the most frequently cited OSHA safety standards for cleaning service companies as well as your own claims history to pinpoint the biggest risks to your workers.
• Build a company culture that prioritizes safety. Does your company treat safety standards as a nuisance or as a vital tool? Company culture can have a big impact on whether safety rules are followed carefully and consistently.
• Give your workers properly fitting personal protective equipment. When working with hazardous chemicals, personal protective equipment is a must, but workers may not use it if it doesn’t fit properly.

When injuries occur, the way claims are handled can also make a difference in the total costs. Tangram provides workers’ compensation insurance designed for janitorial and building services companies, and our program includes specialized claims handling and risk management. Learn more.