Filed Under:Risk Management, Loss Control

6 ways to improve return-to-work incentives and cut workers’ comp costs

For most employers, workers' compensation costs have a significant impact on the bottom line. (Photo: iStock)
For most employers, workers' compensation costs have a significant impact on the bottom line. (Photo: iStock)

The workers’ compensation system is built on mutual accountability.

The employer and insurer are responsible for paying required benefits promptly. The employee is obliged to be honest and return to work as soon as possible. 

But often, the system has disincentives that encourage employees to stay out longer than necessary. Employers need to constantly evaluate their programs and remove barriers that discourage gainful employment and return to work.

Here are six things employers can do to cut costs and help their injured employees get back on the job successfully.

Related: How this supermarket chain slashed drug costs 71% in 2 years

Business meeting diverse

(Photo: iStock)

1. Identify and remove disincentives

An otherwise sound return-to-work program can be sabotaged by a program design that works against the intended goal. When out-of-work employees receive more income and benefits than they receive while working they may have an incentive to stay out of work as long as possible.

  • Wage-continuation and supplemental-income programs. Under wage-continuation programs, the employer pays 100 percent of salary in lieu of workers’ compensation for injuries of short duration. Supplemental income programs pay additional wages to an employee on workers’ comp, so the employee doesn’t lose any money. Because workers’ compensation is tax-free, grossing up means the worker often receives more than 100 percent of pre-injury earnings.
  • Disability benefits or unemployment compensation. Some employees can receive short-term disability (STD) in lieu of salary after six weeks or qualify for unemployment compensation. It’s possible the employee may be able to collect workers’ compensation and STD or unemployment benefits.
  • Pension and retirement plans. Plans that don’t allow for offset of workers’ compensation benefits may let an employee receive workers’ compensation benefits and a full pension. A disabled worker may then decide it’s more beneficial to receive permanent partial or full disability.
  • Open-ended job return rather than a specific timeframe. Holding a job open indefinitely sets the wrong expectation for the employee. There may be benefits to staying home, such as saving on commuting, childcare and other work-related costs. A specific time limit should be set, while being sure to comply with the Americans with Disabilities Act and the federal Family and Medical Leave Act, as well as any state leave laws. 
  • Vacation and sick time. Employers should not allow vacation or sick time to accrue while an employee is on workers’ compensation because it enables the injured worker to stay out of work longer.

 Related: Colorado health care amendment's true cost to workers’ comp

Calendar with back to work sticky note

 (Photo: iStock)

2. Create proactive return-to-work practices

Employers, insurers and self-insureds can take proactive steps to remove disincentives without infringing on the rights of injured employees to receive the benefits they’re entitled to.

The claims management team and the employer must first examine their policies and procedures, as well as engaging all interested stakeholders from the top to bottom—including employees.

  • What benefits are injured workers’ receiving by not working? Are they excessive?
  • What are the goals of the program, including successful return-to-work following an injury?
  • What are the opportunities to make improvements involving the employee in return-to-work and the transitional-duty process?

 Related: Wearable technology: The new game changer in workers’ compensation

Return to work guide

(Photo: iStock)

3. Set expectations and communicate policies

Effective return to work in workers’ compensation management starts the first day an employee walks through the door. Employees need to have expectations set prior to a work-related injury, including details about safety and injury prevention, policies and procedures on reporting an injury, and information on post-injury care and return-to-work best practices.

Employees should be provided with written policies and procedures describing program limits. They also need user-friendly items such as an employee brochure and wallet card containing contact and how-to information. Having that information is critical at the time of injury to ensure proper treatment. 

The employer must reinforce the message that injured employees are still valuable assets to the company and that it’s committed to returning them to work as soon as possible. 

Related: How did this company cut its injury claims? By aiming at the bottom

Job description

(Photo: iStock)

4. Maintain transitional job descriptions

Once a smart injury-management and return-to-work policy has been established, the employer must put it into action. Returning an injured employee to work is the most effective cost-reduction tool in a successful program. It promotes faster healing and recovery for the injured worker, stops employees from losing marketable employment skills and prevents them from becoming psychologically dis-employed.

  • Examine the physical requirements of each job at the organization and develop a transitional-duty work description for each position.
  • Reiterate your policy when an injury occurs, and give the employee written highlights of the program. The employee should also be asked to review the full policy documents as a reminder and for compliance.
  • Discuss with the injured worker transitional-duty jobs that can accommodate their medical restrictions. 
  • Review transitional-duty work restrictions with the employee the first day back on the job. Remind the worker that the transitional-duty job requirements will change as the employee recovers and the treating doctor reduces work limitations.

Related: Predictive analytics reduces risk in Workers’ Comp

2 men business meeting

(Photo: iStock)

5. Meet with returning employees regularly

Have weekly meetings with the employee. Discuss how healing is progressing, what activities can be performed, and the employee’s progress in the transitional-duty position based on reduced medical restrictions.

The meeting should be positive, and emphasize that you’re working together for the employee’s full recovery.

Related: Top 5 most common workplace accidents and injuries

Workers comp claim form

(Photo: iStock)

6. Contest claims when necessary

Be prepared to contest claims in situations in which the employee becomes non-compliant, appears to be extending the disability or develops conditions that were not presented at the time of injury. This may require investigations, medical examinations and documentation.

To keep workers’ compensation award challenges to a minimum, ensure that your return-to-work program is used for all injured workers fairly, regardless of the injury or any surgery that was performed.

The goal of employers should be to return 90 percent of employees back to work within four days. That may sound very optimistic, but with sound policies and transitional duty, it’s quite feasible.

Related: Pork producer’s safety overhaul nets 69% claim-cost reduction

Michael Stack, CPA, is the principal of Amaxx LLC and a co-author of “Your Ultimate Guide to Mastering Workers Comp Costs” (2016 edition), as well as the founder of COMPClub, an exclusive member training program on workers’ compensation cost containment best practices. He can be reached at or 781-561-5222.

Rebecca Shafer, J.D., is an attorney and founder of Amaxx Risk Solutions and the co-author of “Your Ultimate Guide to Mastering Workers Comp Costs” (2016 edition). She can be reached at or 860-786-8286.

Featured Video

Most Recent Videos

Video Library ››

Top Story

5 things to know about the NAIC's new cybersecurity model law

The NAIC's newly-adopted Insurance Data Security Model Law provides guidance for carriers, agents, brokers and their business partners.

Top Story

5 insurance advisor marketing mistakes to avoid

The right marketing tactics can help insurance agents and brokers reach their goals.

More Resources


eNewsletter Sign Up

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Mobile Phone

Advertisement. Closing in 15 seconds.