Business Guidance / Insurance Protection

Workers’ Compensation Cost Containment Strategies

Workers’ compensation is a required benefit that all employers must provide for their employees. By 1949, it was adopted by all 50 states and it used to pay for lost wages and medical bills when an employee is injured on the job. Some employers look at workers’ comp as a sunk cost or a cost of doing business. These businesses typically spend more for workers’ comp than businesses that work to proactively improve their safety culture and minimize on-the-job accidents. The rate in Pennsylvania for a carpenter can range from $5.91 per $100 of payroll to as much as $20.66 per $100 of payroll. This means a business could be spending almost four times as much as a competitor.

What determines how much a business spends on workers’ comp?
If a company has multiple work-related accidents each year and is deemed an undesirable company to insure, they are going to pay a higher rate. If a company does not have many work-related accidents and they proactively promote safety to their employees, they will be able to negotiate better rates which translates to lower costs.

Here are three things employers can do to reduce their workers’ comp costs.

Watch Your Experience Mod
Do your best to keep your experience mod at or below a 1.0. A company’s experience mod is how an insurance company checks the pulse of a company’s safety culture. If a business has an elevated experience mod (anything over a 1.0) there is a good chance it had at least one sizeable workers’ comp claim in the last four years. Work-related accidents will occasionally happen, how they are managed after an accident is crucial to how your experience mod will increase over the next few years.

Develop a Formal Return-to-Work Program
Businesses should have a formal return-to-work and light-duty program. If an employee gets hurt and cannot do their previous job functions, many employers let the employee stay home and collect their wages through a workers’ comp payment. This has proven to increase the overall costs of workers’ comp claims. At alternate approach is to proactively work with those employees and find jobs that they can do that fit within the scope of the physician’s orders. This can keep the employee engaged at work and statistically they return to full duty sooner than an employee who does not come back for light-duty.

Follow Claims Closely
When an employee is collecting workers’ comp benefits, stay up to date on how things are progressing. A typical workers’ comp adjuster handles 100-150 cases at a time and, as the saying goes, “the squeaky wheel gets the grease.” Work closely with your broker and the claims adjuster to see how you can work to get the employee back to your office. Otherwise, months, and even years, can slip by as the employee continues collecting their wages and accumulating more medical bills.

If businesses stop looking at workers’ comp as a necessary cost of doing business, they can turn this from a sunk cost into a profit center. While results won’t happen overnight, executing a plan will lead to rewards. If you’re interested in reviewing your coverage and discussing ways your business may be able to cut costs, contact one of our Business Risk Consultants at 800-220-3077 or


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