These numbers are then multiplied by the manual rate to set the premium. In practice, the average rating is somewhat under 100. This system provides a good way to assess whether employee ownership has any impact on an important area of corporate operations. Experience modification ratings can be lowered by employees being more careful, by company policies, such as worker safety teams, that find ways to reduce risk, or by workers filing fewer claims. The ratings are not a perfect measure, however.
Less weight is given to smaller companies' experience in worker modification rates.
Because averages are calculated over three previous years, with a one year lag, there may be few changes in the ratings showing up in the initial years after an employee ownership plan is established. There is also no way to determine whether companies implemented other kinds of cost reducing initiatives coincident or following the establishment of employee ownership, such as setting up safety teams. If these teams would have been set up anyway, then the impact of employee ownership is muddled. Our data set consisted of 117 California employee ownership firms from NCEO lists. We were able to obtain experience modification ratings for these companies from 1981 through 1993 and statewide averages for 1981 through 1992.