(FORTUNE Small Business) – Until Oct. 24, 1997, I thought I was doing all I could to prevent employees from getting hurt. Then a young printing-press operator tripped, fell into a press at my family's plastic-bag factory, and lost most of three fingers. The injury left him with a nearly useless hand. Even today, just thinking of the pain he suffered, I feel sick. My family also felt a sting to our reputation. Employees wondered whether we were serious about protecting them. From that day forward, I put safety at the top of my agenda.

By investing in machine guards, I took a first step toward making Emerald Packaging safer. But I knew that wasn't enough to reverse our dismal safety record. In 1997 more than 30% of our 90-member factory workforce reported injuries. Most were minor, but three, including the young man's, required extensive medical treatment. Many were the result of bad habits. The printing-press operator, for instance, tripped while running. As our insurer forked over tens of thousands in disability pay, our workers' compensation insurance premiums skyrocketed, rising by some $60,000 in 1999 alone.

But reducing injuries turned out to be a surprisingly stubborn problem. When it came to accidents, many employees seemed to have an "it can't happen to me" attitude and resisted changing the way they worked. Until four years ago. After my insurance broker told me that paying people not to get hurt had helped other firms, I decided to resort to bribery. So in 1999, I set a goal of only 12 accidents for that year--half of the total for 1998--with none causing lost time. If workers racked up less than three injuries a quarter, I promised to buy them lunch, hand out company T-shirts, and raffle off $1,000. Not one of our employees missed work because of injury for the next 1,252 days, three times our former record. Employees even began to push one another to stop unsafe work habits--for example, yelling at one worker who repeatedly was injured by failing to wear safety glasses while cleaning machines. After three straight years of being injured and taking time off, he got through 1999 unhurt. By year-end we had logged only 11 injuries, none with lost time. In fact, since 1999 we've sustained only 46 injuries.

I credit our bonus plan with turning things around and helping us build one of the best safety records in our business. This year we'll distribute $50,000 among our 100 employees for keeping our injury costs below $40,000 last year--and thereby helping us save $200,000 in 2003 on workers' compensation insurance.

Our safety incentive program has worked so well that I've made bribery a permanent part of my management arsenal. Since I introduced the first bonus, my company has offered incentive programs for quality, waste reduction, and finding new employees. Our waste-cutting incentive, for instance, paid employees $100 a quarter if they decreased plant waste from 15% of the total pounds of plastic bags produced each month to 7%. It succeeded because the payoff was immediate and tied directly to the way employees ran their machines. Within two quarters of unveiling the program, we succeeded.

The funny thing about using incentives is that once you finally get people to change, you don't have to keep rewarding them for good behavior. We've gotten rid of the waste-reduction bonus, but waste has continued to fall, most recently to 5.5%. That saves us more than $100,000 a year on materials. Hopefully the day will come when I won't have to pay employees not to get hurt; they'll be too addicted to working safely to quit the habit.