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How to Lower Your Workers Compensation Costs

Four Ways to Reduce Claims, Lower Costs, and Get People Back to Work

By James Barr, Vice President

Workers compensation is one of those aspects about being a business owner or HR manager that brings little joy, truth be told. Nobody wants to see a valued team member get injured, and disruptions to the workforce can cause more than just lost productivity. If lasting long enough, prolonged employee absences can serve to chip away at company culture and camaraderie as well. 

And then, of course, there are the costs. Going without a team member active at a designated job can be a hit on productivity. Not only is the employer challenged with replacing the output of that team member, any reallocation in human resources to cover for that lost productivity brings additional strain on the company.

This says nothing of the hard costs associated with workers compensation: premiums, premium increases following claims, and overall monetary expense of either hiring temporary replacement workers or offering incentives for employees to work longer hours.

Workers-comp-related issues can have a tremendous impact on employers, their teams, HR departments, and the overall profitability of a company. So while it may not be the most enjoyable topic of conversation or strategy planning, it does represent a critical area of scrutiny for companies. 

Here are four ways we counsel employers on how to curtail or offset the lost productivity and high costs of workers compensation claims.

A Workers Comp Checklist for Employers

There are a few important initiatives that employers and human resource teams can pursue. While each of these do require some proactive application of budget and talent, they are relatively small investments, compared to the toll workers compensation claims can have on a company and its finances.

  • Create a safe workplace campaign. When I say campaign, I mean to emphasize formalizing policies and procedures so they are meaningful, broadly communicated, and given due focus — much more than mere lip service. The keys to making such a campaign successful are to document it in writing, formally announce it to employees, and maintain a commitment to the program with rigor. Examples:

    • For every 100 days the company goes without a workers comp claim, the company will treat the entire team to a pizza lunch, or

    • For every quarter the company goes without a claim, each employee will receive a gift card of some kind.

Such campaigns have been proven to reduce claims and keep the employee base more engaged in overall worker safety. Workers compensation claims can result in thousands of dollars or more in premium increases, based on the size of employer and the number of claim incidents. Whenever one occurs, the company’s workers compensation will undergo what’s known as an “experience modification,” which will raise premiums for a minimum of three years. Those increases in premiums can really add up!

  • Exercise aggressive claims examination and constant communication. Whenever a workers comp claim occurs, the employer’s HR department should be in constant communication with the insurance company’s claim adjuster to make sure the claim is moving through the process and not languishing in “neutral.” Sometimes, these claims can get stuck in “administrative limbo,” and the longer that claim remains open, the more costly it is to the employer. Make sure your company establishes claims advocacy procedures that are followed the moment a claim occurs. This includes not only working with the adjuster to make sure the claim continues to move along, but also maintaining open communication with the employee filing the claim. Make that employee feel valued and welcome to return as soon as they’re able. Studies show that the longer an employee remains off a job, the less motivation they have to return to the company, as they experience increases in “psychological absenteeism.” It is incumbent upon the employer to keep that employee engaged and to get them back into the workforce as soon as possible to not only mitigate financial loss but human resource loss as well. Don’t let a simple workers comp claim be a company culture killer, on top of all the other attendant costs.

  • Implement a restricted-duty return-to-work program. Further in the interest of reducing employee downtime — or worse, turnover — and to help mitigate rising workers compensation claims costs, we recommend that employers institute a formal program that serves to get employees back to work, even if they can’t necessarily get back to their normal job. For each job description that exists within the company, make a list of other job responsibilities that each employee can perform with limited restrictions, should there be an injury to the person serving in that job’s capacity. Not only does this get the valued team member back to work sooner than otherwise possible, such a written policy can be demonstrated to workers compensation insurance carriers as a tangible commitment to minimizing claim duration. It can also provide a “defense mechanism” of sorts against workers comp claims that linger and keep costs elevated.

  • Make pre-employment physicals and drug testing standard operating procedure. Pre-employment screening can have multiple benefits. Physicals can serve to detect any potential physical limitation of a worker being potentially prone to injury. Drug screening can identify potential at-risk employees, as those who suffer from dependence or addiction to alcohol or narcotics are at greater risk of accidents or injury if they are attempting to perform their duties while under the influence. An ounce of preventative medicine here is definitely worth a pound of claims-adjudication cure.

For many business sectors, workers compensation claims are unavoidable. But that doesn’t mean that employers and HR departments should willfully accept higher expenses as a necessary cost of doing business. As demonstrated above, workers compensation claims and workers’ absence from the workplace bear far greater costs on the company than merely financial losses. Be proactive — against future claims and about creating a corporate culture that values employee inclusion and uptime. 

Both increasing costs and employee turnover can be reversed, but the employer must be proactive. And as we often advise when it comes to employment best practices, make sure you get it in writing.

If you would like to discuss these or other ideas that can help lower your company’s workers compensation costs, please "contact me at (586) 949-2300" <jbarr [at] gcbinsurance [dot] com>.  I’d be happy to meet with you to share what other employers are doing to successfully curtail higher costs and support company culture at the same time.