“We don’t have work available for you.  Come back when the doctor says you can do your regular job.  That’s why we have workers comp insurance!”

Those are costly words!  Costly to your company…and costly to the employee.  Those words potentially set the stage for a downward spiral of events for both the employer and the employee.  Let’s consider the costs.

Cost to the Employee

There is a false belief among some workers that, if they are injured, they will be off work, but will continue to collect regular wages.  However, rarely are the true effects realized.   Workers compensation statutes vary state-by-state, but in every state there is a limit to what an injured employee may earn while off work due to a work-related injury.  In most states, the maximum an employee will receive in compensation is 2/3 of his/her average monthly wage (which is capped at a certain limit).  Just like regular income, compensation is taxed.  Most employees cannot maintain their standard of living on 2/3 of their income.  Therefore, the worker and his/her family are greatly affected.

Furthermore, studies indicate that when humans are productive they heal more quickly.  The treatment period for a worker who is off work is significantly greater (usually about 30-40%) than the worker who returns to modified duty and is able to be productive, even if in a limited capacity.  The longer the worker is off, the longer his income remains below the normal standard of living, thus diminishing the worker’s quality of life.  Also, the longer a worker is off work, the greater the chance he/she will not return at all, developing a “disability mentality.”

In some cases, the employee who is off work may sit at home watching lawyer commercials, and become convinced that he will actually make more money if he hires an attorney.  Keep in mind that “settlements” for workers comp claims are established by statute, and there are no punitive damages.  Therefore, the worker will still get only what is allowed by statute…and typically the attorney will get 1/3 of that!  The employee is then left with only 2/3 of what he is eligible for through the workers comp policy.

Cost to Your Company

The most dramatic cost effect may be on your company’s experience modifier (emod), particularly if you are a large company.   An emod is a factor that is applied to WC rates.  Therefore, it affects your entire payroll.   If an injured employee returns to work immediately, his/her claim is calculated at only 30% for emod purposes.  However, once the employee becomes eligible for lost wages, the claim will be 4-5 times more costly, and will be calculated at 100%.  To illustrate:  A $1,000 medical only claim is calculated at $300.  Once compensation for lost wages is added to the $1,000 claim, it becomes a $4,000 claim (by conservative statistics).  That claim is now calculated at $4,000, rather than $300!  Depending on your premium base, that single claim could affect your rates by as much as 15%.

The second most dramatic effect may be the potential that an unproductive injured worker may, indeed, hire an attorney.  As illustrated above, though the worker stands to lose in this situation, your company stands to lose as well.  If an employee hires an attorney, the carrier must also hire an attorney to defend your interests.  This also drives up the cost of the claim, even when we are successful in defending it.

In addition, other consequences such as low employee morale, additional training, cost of replacements, reduced productivity and greater turnover are all factors that point to the need for an effective Return to Work program.

Effective Return to Work Programs:

• Speed recovery for injured workers
• Provide income relief for injured workers
• Improve employee morale
• Reduce training and turnover
• Improves productivity
• Reduces litigation
• Minimizes direct and indirect costs
• Reduces the profit loss for your company

Attend CBR’s monthly Safety Seminars for help in implementing and strengthening your Return to Work program.