Dear Leaders

A weekly letter with actionable leadership ideas.

Workers’ Compensation

By Hamza Shayk

Dear Leaders,

There are a number of techniques for bringing about modest reductions in the cost of workers’ compensation insurance.


One of the key determinants of the cost of workers’ compensation insurance is the job classifications into which all employees are slotted. An employee designated in a high-risk classification will cost far more in insurance premiums than someone in a clerical position. Consequently, review the classifications for all employees once a year, just before the insurance is due for its annual renewal. If an insurance auditor wants to reclassify an employee into a higher-risk classification, then this is worth the human resources staff to protest the designation.

Employee Screening:

It is of considerable importance to conduct a drug test, background check, and felony search for every job candidate who is being considered for employment. By doing so, a company may spot someone who has a history of workers’ compensation fraud or who has indicators that may lead to false workers’ compensation claims. The cost of this screening is far less than the savings from a single workers’ compensation claim.

If a company has a large workforce and there are numerous workers’ compensation claims, then it can be cost-effective to hire an on-site nurse and route all such cases through that person. The nurse can conduct an immediate evaluation of probable claim types, provide initial care, and dispatch employees to a medical care facility. These actions can mitigate the size of a company’s workers’ compensation claims.

The incidence of employee injuries may be impacted by their use of illegal drugs. To see if this is the case, institute a policy of requiring post-accident drug testing. If a test is a positive, then the company has grounds for terminating the employee, thereby preventing any future workers’ compensation claims from arising.

Other Alternatives:

If an employee has a legitimate workers’ compensation claim and is unable to perform his job, then consider having him come into the office and perform some less stressful tasks that will not interfere with his recovery from the original injury. This will likely require the participation of a doctor and the cooperation of the injured employee.

If a company is experiencing large numbers of claims in a specific work area, it should consider outsourcing the work performed in that area. While this may seem like an extreme solution, larger claims can be very expensive, and will eventually drive up a company’s insurance premiums dramatically. When the alternatives to outsourcing are ongoing insurance payments, extensive staff retraining, and the purchase of safety equipment, outsourcing may not seem like such a bad alternative.

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