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Tips For Minimizing Business Costs and Risks of Workers' Compensation

By Elizabeth M. Rice, SPHR

Each year, workers compensation insurance costs businesses billions of dollars, and the premiums keep rising. In fact, California is one of the states most affected by the costs of workers compensation.

Every U.S. state, except Texas, now requires employers to have workers compensation insurance. Workers compensation insurance safeguards both the employer and employee from financial risk and responsibility resulting from workplace injury and illness.

Recent events of 9-11 and terrorism, eroding capital markets, and fraudulent workers compensation claims are all reasons for significant increases in workers compensation premiums. In California, alone, the basic costs of workers compensation insurance will total $29 billion by year-end 2003, a California Department of Insurance analyst estimates. That's up from $13.96 billion in 2001.

Innovative Employee Solutions®, a San Diego-based company specializing in payroll and benefit administrative services for the contingent workforce, offers the following tips and strategies to help employers minimize the costs and risks of workers compensation premiums and claims.

• Establish a workplace-safety training program for employees. Prevention is the best safeguard against on-the-job injuries. Employers should institute an effective training program to educate their employees about safety best practices in the workplace. The training program can include: educational videos and reading, seminars, interactive discussions, and quizzes to test employees' knowledge on workplace injury prevention.

• Place injured employees who qualify on a modified work plan. Opposed to having an injured employee take a long leave of absence, many employers are now instituting modified work plans for certain employees. This involves modifying an employee's normal job responsibilities, so they can perform specific capable tasks while avoiding others that they are unable to perform due to injury or illness. The modified work plan also makes scheduling allowances for employees' doctor visits or recuperation time.

• Conduct background checks on new employees. One of the biggest reasons for the rising cost of workers compensation insurance is fraudulent claims or employees who extend their workers compensation benefits longer than necessary. Conducting a thorough background check on employees helps businesses safeguard themselves against hiring a dishonest or unethical job candidate.

• Enforce a drug-free workplace. Employees who are affected by substance abuse are much more likely to injure themselves on the job, or take longer leaves of absence. Employers should enforce stringent policies on drug and alcohol abuse. The first important step is instituting a drug test for new hires. Employers should also talk to their employees, and establish an educational program about the consequences of substance abuse.

• Hire an outsourcing partner to handle workers compensation issues. An HR administrative outsourcing provider helps businesses significantly minimize the costs, risks and hassles of handling workers compensation issues in-house. The HR administrative service can: complete all the proper forms and procedures for workers compensation claims, train employees on workplace safety best practices, and negotiate a more competitive workers compensation premium.