Workers’ compensation is designed to protect both your business and your employees in the case of workplace injury. When an employee has a work-related injury, workers’ compensation helps cover medical, disability, and rehabilitation costs. This way, as an employer, you won’t have to pay directly out of pocket and you’ll have protection against further liability for a covered injury. But what else happens on the employer’s side? How does a workers’ comp claim impact you as an employer?
Here are 10 ways workers comp claims affect your business and 10 things you can do about it.
How workers’ comp claims and workplace injuries affect employers
Employers who do not have workers’ compensation insurance for their employees can face exorbitant costs if an employee is injured. What’s more, in most states, it is against the law to have a small business that is uninsured by workers’ comp.
On the other hand, employers who do carry workers’ compensation coverage for their employees are protected from liability and from having to pay out of pocket for employee injuries. However, employers with coverage still face direct and indirect costs associated with workplace injuries.
Direct costs for workers’ comp claims and workplace injuries
The primary direct cost to employers is the expense of workers’ compensation insurance premiums. In return for premium payments, employers get insurance coverage. A higher number or greater severity of workplace injuries typically leads to higher premiums.
Indirect costs for workers’ comp claims and workplace injuries
The indirect costs to employers are those expenses that are not covered by workers’ compensation insurance. Indirect costs of workers’ comp claims are outlined in a Stanford University report and published online by the OSHA Small Business Safety Pays Program and are listed below.
10 ways workers’ comp claims affect you as an employer
- Your workers’ compensation premiums will likely increase.
- You may owe wages to injured workers for any absences not covered by workers’ compensation.
- You will need to cover the expense of work stoppage associated with the worker’s injury.
- You may incur overtime costs due to the injury.
- You will need to cover the cost of administrative time spent by supervisors, safety personnel, and clerical workers after an injury.
- You’ll need to pay to train a replacement worker.
- You may lose productivity related to work rescheduling, new employee learning curves, and/or accommodation of injured employees.
- You will have to cover clean-up, repair, and replacement costs of damaged material, machinery, and property.
- You may have to pay OSHA fines and any associated legal action.
- You may have a loss of goodwill if the incident was publicized.
10 ways to manage direct and indirect costs of workers’ compensation
The good news is, as a business owner, you can take the following steps to lower your premiums and mitigate the impact of workers’ compensation claims and workplace injuries:
- Shop around to compare costs for worker’s compensation insurance.
- Make sure your employees are properly classified according to their workers’ compensation class code.
- Confirm that your insurance provider has accurate payroll information.
- Implement a safety plan customized for your employees and business.
- Hold employee safety training and workplace safety inspections.
- Submit all workers’ comp notification and claim forms on time.
- Ensure your employees know where to go for medical treatment in case of workplace injury.
- Bring employees back to work as soon as they are able, offering modified activities if needed.
- Be vigilant about fraudulent workers’ compensation claims.
- Use OSHA’s estimated costs of occupational injuries and illnesses and estimated impact on a company’s profitability worksheet to find out how your bottom line could be affected.
Thanks for reading! Please note that this content is intended for educational purposes only. As laws change regularly, you should refer to your state legislation and/or an advisor for specific legal counsel. If you’re a small business owner, learn more about workers’ compensation insurance or check your current rate in 3 minutes.