Workers' Compensation: Four Mistakes Employers Can Make
February 8, 2012
Many employers look at Workers' Compensation as just another unavoidable cost of doing business. It's usually one of those out-of-sight, out-of-mind issues when rates are low. It's not until employers are hit with rate hikes that they really start to give some thought to it.
Employers need to look at Workers' Compensation as a tool to improve the bottom line, and they certainly need to make an effort to keep their rates low over the long-term so they can take advantage of some significant savings.
Here are four mistakes made by employers that can deter their Workers' Compensation savings:
1. Don't assume that lower rates equate to lower costs.
Don't make the faulty assumption that your cost will automatically go down just because your rates have been reduced. Workers' Compensation insurers use an experience modification factor to examine the actual losses incurred by the insured company to establish cost. The actual losses are compared to other industry-alike companies. If the insured company's past losses are below average, then the insurer gives the company a credit rating lowering their premium, but an added surcharge is applied to the premium if the insured company's past losses are above average.
2. Don't believe employers have little control when it comes to the expense of Workers' Compensation.
Employers know they must have Workers' Compensation insurance. However, this acknowledgment shouldn't lend to an employer thinking they've got to pay excessively for it. Cost reduction starts with the hiring process. Initiate effective interview techniques and background checks to help ensure the right people are hired for the right jobs. That said, there's no way to completely eliminate the possibility of injuries in a workplace.
Therefore, it's equally important to have an effective return-to-work program in place to simultaneously assist injured workers return to work as soon as possible and reduce the cost of their claims.
3. Don't neglect or de-emphasize cost containment and injury management during low rate periods.
Safety should be an unyielding focus at all times. This will not only help a company reduce their claim numbers, but also keep their rates low over the long-term. Employers need to keep an eye on the issues that frequently impact the costs of claims, such as medical care costs and lost wages. Also, remember that open claims mean escalating costs and negative impacts to the company's modification factor. Of course, this causes an increased cost for coverage.
4. Don't ignore the association between cost containment and worker retention.
Studies have shown that fewer accidents occur among skilled workforces, but even skilled workers can have an accident. A large factor in whether or not an injured skilled employee returns to work is based on how the employer responds to the individual during and after recovery.
An important part of an employer's response is having a return-to-work program that includes maintaining constant contact with injured workers and their health care providers to monitor how they're recovering and when and how they can get back to work as soon as possible. Skilled employees are more likely to return if they are kept in the loop with a return-to-work program's periodic phone calls about workplace changes that might be occurring in their absence. On the other hand, skilled employees that feel forgotten, undervalued, and disconnected are less likely to return.