Instead of rewarding workers and departments that avoid industrial accidents with pizza parties and cash, experts say companies need to overhaul their incentive programs to create safer workplaces.

Employers need to look at various metrics—not just incident and accident reports required by the government—in crafting reward programs.

Enrollment in safety programs, for example, could be one metric for safety awards. Some experts say rewarding “near-miss” accidents is the way to build a better workplace.

“If you get 20 safety people in one room, you won't get them to agree on one program,” said Brad Hammock, Washington-based partner and chair of Jackson Lewis L.L.P's workplace safety compliance group. “Safety incentive programs are a difficult issue; there is no one answer as to what makes an effective safety incentive program.”

One area where many experts agree is that the current reward system—in place among many companies nationwide—is not accomplishing its intended goal.

In 2009, while studying issues related to mandatory Occupational Safety & Health Administration injury reports, the Government Accountability Office found that underreporting of workplace safety incidents is rampant. The GAO study found that safety programs that reward workers who avoid injuries may have something to do with workers and supervisors “fudging” the numbers,” Mr. Hammock said.

Experts said the government's assertion is right on the mark.

“On the surface, it seems like a good idea: You want to provide incentives for people to avoid injuries in the workplace,” said Dr. Robert K. McLellan, Lebanon, N.H.-based chief of occupational and environmental medicine at Dartmouth-Hitchcock Medical Center. “The problem is these incentive programs may incent behaviors that are not really safe behaviors, but are designed to make the log look good.”

Experts say incentive programs that base rewards solely on the number of incidents and accidents reported tend to urge workers not to report injuries. “That's when people start to hide things,” said Ron Prichard, founder of Plainfield, Ind.-based Arcanum Professional Services Inc., a firm that provides safety, quality and management consulting services for companies.

In an example cited by experts, cash incentives for managers are dangerous because employees could fear retaliation for reporting an incident. Managers who have a stake in reported incidents could pressure subordinates. This issue got the Northern California grocery chain Raley's Family of Fine Stores in trouble recently when two managers were accused of urging injured workers to not file workers comp claims and rely on their health insurance to cover their injury.

Raley's settled the case with the Sacramento County District Attorney's Office in May. Supervising Deputy District Attorney Dale Kitching said the managers' cash bonuses were tied to “store profitability” and “profitability was tied to fewer workers comp claims.”

“We argued that (the) managers had a monetary incentive” to reduce workers comp claims, Mr. Kitching added.

Experts also say that incentive programs that reward groups that avoid incidents can put workers in fear of “ruining it for everybody,” said Mr. Prichard, who has spent several decades in construction and manufacturing risk management and consulting.

“Group pressure—to me, that's the worst one,” Mr. Prichard said. “Someone gets hurt and they are afraid to talk about it because they fear how their cohorts will view them if they report their injury.”

He said he considers many worker incentive programs to be “bribery.”

“It always struck me that there was something wrong with this,” Mr. Prichard said. “With incentives, people take shortcuts.”

If a company wants to tie incentives to safety, experts say to tread carefully. One approach that's gaining popularity is a program that rewards employees for taking steps to create a safer workplace, whether that is attending a voluntary safety seminar, helping a worker avoid a mishap, or even maintaining equipment so that it is safe to use.

Safety Jackpot, for example, is a program created by Lenexa, Kan.-based Peavey Corp., a company that provides incentive programs and law enforcement supplies. In place at hundreds of companies, the program aims to create safer workplaces by giving workers “coins” that can be used to buy items from a catalog of goods as a reward for on-the-job safety measures.

“Our (program) is really based on the behaviors tied to safety audits and safety training, even accident investigations,” said Pat Tracy, unit manager for Safety Jackpot. “We are taking the behavioral approach...Nobody goes to work saying, "I am not going to have an accident today.' But if we can tie the incentive to the behaviors, what we find is the accidents can be reduced.”

Mr. Tracy said the Safety Jackpot system aims to change workplace cultures and provide incentives to workers who take safety steps. “An act as simple as cleaning a machine, locking, tagging a machine to make sure people know it's locked can mean a reward,” he said. “We can reward people for wearing their protective equipment. It's all about creating a culture.”

Dartmouth-Hitchcock Medical Center's Dr. McLellan said companies could consider rewarding employees who report incidents.

“By keeping accurate statistics, we are more able to understand where are the bigger problems are in the workplace and drive resources to prevent injuries,” he said. “We want to know what injuries are associated with certain occupations. That's the whole purpose of reporting.”

The GAO report recommended that OSHA reports include interviews with workers instead of just data.

“What we really need is a dashboard of metrics,” Dr. McLellan said. “What we need is for (OSHA) to go outside of your office and try to mine information—going out into the workplace, into the emergency rooms, into the doctor's office to validate the numbers in the OSHA log.”

The GAO's report recommends that OSHA inspectors interview workers during its regular audits.