Indirect costs associated with a workers compensation insurance claim are unbudgeted expenses, like overtime, lost earnings, employee morale, and disruption of the workplace. The Bureau of Labor Statistics estimates indirect expenses can cost between 2-20x the cost of the actual claim! In this article we’ll talk about how you as the business owner can control these indirect costs and why it is imperative that you do.

Workers Compensation Insurance

So, why is controlling indirect costs so important after a workers comp insurance claim?

First and foremost, indirect costs are unbudgeted meaning you are likely unprepared financially when they pop up. Picture this: an employee gets their finger caught in a machine in your facility. You report the claim within 24 hours to your insurance agent [learn more about this process HERE], now your employee is out for the next two weeks. You will now have to absorb the unbudgeted cost of overtime, lost earnings, and disruption to your workflow. So, how do we decrease it?

How to reduce the employer cost of indirect costs associated with workers compensation insurance claims

Return to Work Policy that emphasizes Light Duty – Getting your injured employee back to work as soon as possible is important for a variety of reasons.

  1. Your employee, while they are not doing their same job, is being productive in your facility elsewhere.
  2. You are reducing lost earnings by having your injured employee productively contributing to your workforce.
  3. You are increasing employee morale by having your employee back at work.
  4. You are reducing the amount of overtime you would be paying other employees if your injured employee were out of the workforce.

“Having a return to work policy that emphasizes light duty work and getting people back into the workforce as soon as possible is the best way to decrease your indirect costs.” – Cole Williams, Professional Risk Advisor with Insurance Associates

The more you know, the better you can prepare yourself if and when an injury happens. Indirect costs associated with workers compensation insurance claims can be reduced significantly, you just need the proper policies in place to ensure that reduction. 

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