Employers can help reduce workers’ compensation costs by minimizing workplace hazards, implementing safety programs, and monitoring OSHA compliance. They can also consider a pay-as-you-go plan that uses actual payroll figures to calculate insurance premiums throughout the year, which may help minimize significant variances during policy audits.

The Cost of Injuries

Workplace injuries aren’t just a matter of safety; they can severely impact your company’s bottom line. These direct and indirect costs can range from workers’ compensation payments to lost productivity. Indirect costs may also include training new employees or replacing equipment damaged by an injured worker.

Indirect costs are more complicated to calculate and can be more substantial than those associated with an injury. For example, if an employee is injured, it may cause co-workers to stop what they’re doing to help them out temporarily. This can result in a loss of productivity for the entire team.

Other indirect costs can include the cost of retraining employees to take on the injured worker’s duties, as well as the cost of hiring temporary workers to cover the workload. There are also the costs of lost revenue and production due to decreased morale or absenteeism and the cost of repairs to damaged property or machinery. Depending on the size of your business, these costs can vary significantly. However, all companies need to understand the actual price of injuries to make informed decisions about reducing them. Good health and safety guidelines and encouraging reporting are ways to minimize these costs.

The Cost of Claims

Despite the perception that workers’ comp is an expensive, inevitable business expense, employers can exert some control over costs. For example, businesses can improve cash flow by leveraging payroll systems that allow for integrating workers’ comp premium payments with payroll. They may avoid costly penalties for late payments.

In addition, a company’s risk profile – the number and type of claims submitted – impacts its insurance rates. Class codes, which indicate the likelihood of an injury or illness, are also necessary, as they are used to calculate workers’ comp premiums. For example, a receptionist’s work environment is less risky than a forklift operator’s and is assigned a lower classification code. If a forklift operator’s job is classified the same as a receptionist’s, an employer will be unnecessarily paying higher workers’ comp premiums.

Many states require companies to carry workers’ compensation insurance for employees who are injured on the job. However, micro-businesses with at most five employees may not be required to purchase coverage. It is best to check with your state’s labor department to ensure you meet the requirements.

The Cost of Rehabilitation

Employee wellness programs have reduced workers’ compensation cost by lowering the time lost to injury. A proactive approach can also lower medical and disability claims, increasing insurance premiums.

Whether you’re a small business with just one or two employees or a large enterprise with hundreds of employees, it’s your responsibility to ensure all employees are protected and have access to the financial support they need should they suffer injuries on the job. Non-compliance could result in fines or even closure for your business.

Workers’ comp isn’t just about paying for medical expenses and lost wages; it’s also about providing rehabilitation services to help your employees return to work. This is important because the longer someone is out of work, the more expensive it is for your business.

For example, employees with substance use disorders can cost your company significantly in terms of diminished productivity, lost workdays, and reduced customer satisfaction. But the good news is that SUDs are treatable, and rehab can make these employees productive again.

Depending on your state, you might be required to purchase a specific type of workers’ comp plan to cover employees in case of workplace injuries. The exact formulas used to calculate your premium can vary from insurer to insurer and depend on your state’s specific workers’ compensation laws.

The Cost of Disability

Although most workers’ comp claims are related to work-related injuries, some employees develop disabling conditions outside the workplace. These types of disabilities may be covered by other insurance, or the employee might buy disability insurance on their own. These insurance policies vary widely regarding coverage limits, benefits, and premiums. In addition, they often have different cost control measures than health insurance. As a result, the cost of disability can be significant for some employers.

As a business owner, you must be aware of this risk and protect yourself

Each state sets its workers’ comp premiums based on the risks that businesses face in their area. For example, police officers and loggers pay higher premiums than receptionists. However, the cost of workers’ compensation can also increase due to factors beyond an employer’s control, such as a state’s economic condition or labor market.

Another factor is the cost of healthcare for individuals with disabilities, which varies widely among states. For example, in fiscal year 1982, indemnity payments for injured workers accounted for $7.3 billion, while disability transfer payments from veterans programs and tort settlements accounted for an additional $5.9 billion in medical care costs.

By Grace