Economic incentives expert group workshop in Rome

Wednesday, May 26th

On Wednesday morning, Dietmar Elsler, project manager at the European Agency for Safety and Health at Work, welcomed the participating experts, and gave an overview of the Agency's structure and functioning, and its economic incentives project. His presentation was followed by three presentations on the approaches with regard to economic incentives in OSH in respectively Italy (INAIL, Liliana Frusteri), Switzerland (Suva, Remo Molinaro), and France (Anact, Anne-Marie Nicot).

The second and main part of the workshop was dedicated to some group sessions. One of these sessions in the afternoon of May 26th was organised for the experts who were new in the economic incentives group. The objectives of this work group (Group A) were to inform the participants on the Agency's project, and to identify the needs and experiences of the participants. Most of the participants agreed that it was good to have more information on economic incentives through the Agency's project, and on the differences and different approaches and practices across the EU.

The following key issues were raised:

• How to make economic incentives in OSH attractive, and how to promote them?
• How to reach SMEs? How to transfer the message to smaller companies?
• How to make sure the "right" enterprises are reached? How to avoid that economic incentives not only reach companies who already have a strong OSH system and culture?
• How to assess and measure the impact of economic incentives in OSH?
• How to transfer approaches from bigger countries (e.g. Germany, France) with strong sectoral cultures (e.g. German Berufsgenossenschaften) to smaller countries that don't have such a sector approach?
• How to avoid underreporting of occupational accidents? Underreporting is influenced by national, cultural, historical and economical factors. A bonus-malus system for example depends on the declaration of employers. One of the questions in this regard is to what extent underreporting is or could be an unwanted long-term effect of economic incentives? Another issue is that for instance in Latvia, a very large part of the workers for several reasons do not declare accidents.

Two other work groups, with experts from countries with respectively a private (Group B) and public (Group C) insurance system, were formed to develop and give direction to a process guideline for the development of economic incentives in OSH. Following issues were to be considered/defined during these work group sessions:

• Target group, such as sector or company size
• Kind of funding, such as experience rating, funding of prevention activities, exposure rating according to risks
• Priority criteria for funding, such as number of workers, risk related to the job, accident rate, time scale of funding
• Stakeholder involvement, such as trade unions, employers, government, private insurance companies.

The outcomes of the discussions in these three Work Groups were presented afterwards in a plenary session, respectively by Lieven Eeckelaert (Prevent), Maria Ottati (HSE) and Remo Molinaro (Suva).

Group B (with experts from countries with a private insurance system) started out with discussing and defining the big principles behind incentive schemes.

• The main thing that should be achieved by incentive schemes is to improve overall working conditions.
• There should be a differential treatment of companies that are investing in OSH and those who don't (fair employers who cause losses should not be treated the same as those who don't).
• The effectiveness of schemes should be considered: companies will only invest if they can really save considerable/significant amounts.
• It is really important that the schemes are made easy to operate: companies should understand easily what they need to do, and what the incentive would mean for them.
• The (private) system should be actuarially sustainable: insurance companies should be credible i.e. that the respective incentive scheme will operate for many years.
• The insurance system can't be purely private but needs to be supplementary to the public system.

When companies would implement a private incentive scheme, the following elements should be considered:

• Timescales and how "long-lived" companies are that implement a private incentive scheme. SMEs have for instance a very short life expectancy that will be made available in a few years will not be that attractive: this should be considered when developing an incentive scheme.
• It is important to understand the country's system, and who is paying for what.
• Two extremes on a continuum: workers compensation versus employer's liability > on a country's political level, it should be decided what sort of mix is desired, how far they want to be on the continuum.

The group discussed the preferred target group of private incentive schemes. The group agreed that these incentive schemes should mainly be targeted at SMEs (as they have the most accidents and illnesses).

There was a discussion as well on whether it is possible to have individual risk-based ratings for small companies. A possible approach would be to differentiate companies for example by going into the companies and examining things such as management systems. It is however unclear whether this approach is cost-effective for private insurance companies to spend so much time on an individual, small company.

Regarding the possibility to look at management systems in order to evaluate companies, Mika Tynkkynen mentioned that this is an approach that is currently being investigated in Finland. The participants discussed how "newcomers" (new companies to an industry) should be treated, as there is no history to evaluate and to look at. Should they be treated based on the sectoral average? Looking at management systems might be a way to go.

Any of such systems should take care of an allowance for accidents that go beyond the control of employers.

Finally, the group also discussed the timescale of funding, and the effectiveness of long-term versus short-term contracts with companies. As SMEs are not interested in long-term contracts, incentive schemes should be focused on short-term contracts which can be prolonged. It was agreed that all stakeholders should be involved in the development of such private incentive schemes: employers, trade unions, government, etc.

Group C started their session with a discussion on what incentives actually mean. Incentives should be seen as prospective instead of retrospective, and therefore bonus-malus systems (BMS) should not be considered as incentives.

The group agreed that social partners must be involved in the design of economic incentives schemes in the field of OSH. It is crucial that the social partners are involved from the beginning, otherwise there is the risk that a developed scheme won't be approved in the end...

The scheme starts with the provider of the incentive, who needs to have a clear view on the strategy. The provider can be a government/state or insurer. Once the strategy is determined, it's important to analyse the company’s needs. In a third step the measures need to be developed. In between the second (needs analysis) and third (measure development) step, the table above can be applied. It contains four dimensions: the risk level of the sector, the size of the company, the degree of the implementation of OSH management, and the degree of outsourcing. If for example, a sector with a high risk level should be dealt with, concrete actions with a focus on technical aspects need to be taken. In a sector with a low risk level, more focus should be put on training.

When dealing with a large company, emphasis should be on the promotion of OSH management, whereas smaller companies require projects with specific targets (as smaller companies generally do not know what to do specifically to tackle OSH problems).

For companies with a low degree of OSH management, OSH management should be promoted, whereas for companies with better developed OSH management, trainings and awards can be applied in order to stimulate the improvement of working conditions.

In the future, work will increasingly be outsourced to subcontractors, which is not favourable for the working conditions. If the degree of outsourcing is high (which will be more and more the case in the future), a possibility could be to require a certification.

Thursday, May 27th

The next morning the group decided to continue the sessions in work groups. Group A was split up and the experts joined groups B or C from the day before. The previous day the work groups B and C discussed the fundamental principles of an economic incentive scheme. The aim of this group session was to build further on the work of the previous day, drafting and giving direction to a process guideline for the development of economic incentives in OSH. This format/guideline should be flexible enough, but not too generic.

The outcomes of the group B session were presented in a plenary session by Athos Charalambous, based on following scheme:

1. Identification of needs at national level (incl. financial flows + consultation of all stakeholders)
2. Principles of systems (incl. roles & responsibilities of all stakeholders)
3. Development of measures (kind of toolbox)
4. Implementation
5. Monitoring/evaluation
6. Review/feedback

A first step in the development of an incentive scheme in OSH, should comprise the identification of needs at national level. This step should take the financial framework and flows (not only the financial flows on the insurance market) into account. In addition, all actors involved in the national strategy on OSH (social partners, inspectorate, insurers, etc.) should be involved and consulted.

Secondly, the basic principles of economic incentives schemes need to be defined. It is necessary that such an approach is based on clearly stated principles, in order to make it acceptable. An economic incentives system should for instance be fair, it should contain qualitative and quantitative indicators, etc.

During the group session there was one comment by Marc Sapir (Belgium, ETUI) on the fact that the private sector for the moment only focuses on accidents, but not on general occupational health, well-being, and psychosocial issues. In his opinion, it is important to cover both. This should definitely be considered when drafting a model and guideline for developing incentive schemes in OSH.

Mario Van Mierlo (The Netherlands) gave the example of the Dutch approach, where the employer is responsible and has to pay the wages for 24 months.

Athos Charalambous (Greece) stated that it is necessary to have objective, tangible data: work-related diseases cannot be included, as the cause cannot be retrieved (the cause of a disorder or disease can be from another employer/work situation).

There was also a short discussion on what kind of incentives can actually be regarded a s incentives. Can subsidies for example be considered as an economic incentive or not? Some experts were of opinion they can, others don't. It should in any way be accepted that there is a lot of deadweight cost related to subsidies (employers would have done a certain investment anyway), so one of the decisions that should be made in this regard is how much deadweight loss one is willing to accept.

The third and probably most substantial step is the development of specific measures. This can be based on some kind of toolbox, a list of possible measures such as premiums, subsidies, grants, 'name and shame', etc., or a combination of these. For each of these measures some kind of template could be completed, with an explanation, some case studies from other countries, their feasibility and effectiveness, etc. Important is that such a toolbox not only covers good practices, but also pays attention to negative points, things that didn't work.

After having chosen and developed appropriate measures, these measures need to be implemented. This process has to be monitored and eventually lead to a review and improvement of the approach.

The group also discussed how the final product should look like. The participants considered it worthwhile to develop a short report, in an executive summary style (3-4 pages), which should be as practical as possible. The key question to be answered by this document should be: "How can you address the development of economic incentives in the field of OSH in your national strategy discussion?". The document should definitely articulate the relation between the target group's needs and financial aspects: "Why are economic incentives the answer?". This document could refer to a database/toolbox of measures and case studies.

Some experts committed themselves voluntarily to work on the different steps of this roadmap, for instance the development of a toolbox of measures.

The results from work group C were presented in plenary by Liliana Frusteri. According to group C, the first important thing is the vision of the provider of the incentive scheme.

In a second step, the strategy behind an incentive programme should be defined. The strategy development depends on the social framework and financial conditions within a specific country and sector, and should amongst others be based on the consultation of the different stakeholders. It is also important to identify the target group (sector, company size, workers' categories,...) to be reached through an incentive programme.

The target group's needs (accident trends, emerging occupational risks, specific technical standards, training needs, etc.) should be analysed in a next phase. Based on this needs analysis, appropriate measures can be defined and developed (e.g. organisational solutions, technical and technological measures, best practices, training programs, etc.). The table that was developed in the previous session (see above, 3.6.2.2), can be applied for the development of specific measures. Finally, when specific measures have been developed, it is important to promote the measures within the target group (sector/companies).

For each of these steps, a simple checklist can be used, considering the following critical points:

• What is the input? (legislation, problems, etc.)
• What are the actions needed?
• Who participates, decides?
• What is the output/outcome?
• What are the pitfalls?

After the presentations by the rapporteurs of the two working groups, the workshop was closed by Dietmar Elsler. He stated that the outputs from the work group sessions were going to be integrated in a general guideline for developing economic incentives in OSH.

Athos Charalambous (Cyprus) asked the experts whether each participating organisation could commit to initiate the debate on economic incentives in OSH in its own country. He gave the example of Cyprus, where amongst others a technical committee was set up. Dietmar Elsler agreed by saying that this is indeed one of the main aims of this expert group: the development of a concept on economic incentives is important, but the promotion of economic incentives is of great importance as well. The publications and factsheets of the European Agency can of course be applied for this purpose.

Oguz Karadeniz (Turkey) mentioned that they had plans to talk to their Ministry, and to organise a national workshop. Experts from the economic incentives group could be invited to this event as well.

It was decided to plan the next expert meeting on the 24th of November 2010, in Brussels. This will be a one-day meeting, which fits into the OSH week of the Belgian EU Presidency and the European Week of the Agency.

The main result of the expert meeting will be a practical guide compiled by the Agency and integrating the complex information of the European economic incentives. The aim is to present the information in a user-friendly way in order to help organisations that plan to create or optimise their own economic incentive schemes.

At the end of the expert meeting a small team (Dietmar Elsler, Henning Krüger, Liliana Frusteri, and Lieven Eeckelaert) put together the results of the discussions in an outline for such a guide. Many of the experts had already indicated during the workshop that they would be ready to continue to work on this guide.

In order to organise the work, Dietmar Elsler has put together a work plan which outlines the division of work. A coordinator for each chapter will start developing some of the ideas. Subsequently, the coordinator will ask the other interested experts for their comments and further ideas. The objective is to give a short presentation (ca. 15 minutes) of the first ideas for each chapter on the next expert meeting in Brussels on 24 November. This will give all experts the opportunity to comment again. Afterwards, the plan will be to finalise the guide in a meeting with the coordinators in the beginning of 2011.