Workers’ compensation insurance is designed to help both your business and your employees in the event of a workplace injury. Workmans’ comp insurance protects your business from having to pay out of pocket for an injured employee’s medical, disability, and rehabilitation costs. But aside from these costs, there are still many ways that a workers’ comp claim can affect the employer.
Here are a few of the indirect costs your business may incur when an injured employee files a workers’ compensation claim—and how you can protect yourself and your business.
Increased Workmans’ Comp Insurance Premiums
After an employee is paid for a workers’ compensation claim, their employer’s insurance premiums will most likely increase. These insurance premiums are calculated using an algorithm that takes into account the number of OSHA filings your business has made. As this number increases, your insurance premiums start to increase above the industry average.
Claims stay on your business record for three years, which means that you may experience higher premiums long after the claim has been paid out.
Loss of Productivity
Immediately after the accident, your business may experience a loss of productivity. Not only are you missing the injured employee, but you may have to stop parts of the production process in order to determine how the worker was injured and what safety measures should be put into place to prevent injuries.
Employee morale can also impact productivity. If employees are worried about facing the same types of injury, they may work slower or more carefully to avoid getting hurt, which can interrupt the flow of work and impact employee satisfaction rates.
Increase in Equipment, Product, and Material Costs
If the accident that injured the employee also caused damage to equipment or products, your business will have to spend the money and time to replace these. This can impact productivity and output, as you will be down a machine or short some products until you can replace them.
There may also be some additional material costs involved. Depending on the accident, cleaning and repair may be extensive. Your business may also have to purchase additional materials to improve safety in your facility.
Extended Administrative Time
After the employee files a claim, your insurance company will contact you to review the accident, the employee’s medical records, and anything else that may be relevant to the incident. Depending on the scale of the accident, this process can take up a significant amount of time for your human resources department (or you) as they hold meetings with the insurance company and lawyers and fill out the appropriate paperwork.
In addition to the time added to process the claim, your HR team will also have to put in some extra work in hiring and training a replacement for the injured worker if necessary. This may result in some of your staff putting in overtime hours, which is an extra cost to the business.
Potential Impact to Brand Reputation
The potential harm that a workers’ compensation claim can have on a business is hard to measure. Depending on the nature and scale of the accident, you may find that the incident is publicized on the local news, which can have a negative impact on your company’s reputation.
A workers’ comp claim diminishes your company’s safety record, which may affect your ability to obtain or bid for high-profile or extensive projects. A loss of reputation in the community can also decrease your ability to find effective new employees, as they may be concerned about safety.
Protecting Yourself from the Negative Impact of a Workers’ Comp Claim
While there are certainly many ways that a workmans’ comp insurance claim can impact your business, if handled correctly, you can mitigate the damage to your reputation, employee morale, and financial viability.
The first step is to create a safe workplace that will prevent accidents in the first place. While not all workers’ comp claims are preventable, fostering a culture of workplace safety through employee training and by following proper safety protocols will go a long way to avoid these kinds of issues.
Next, invest in a robust, cost-effective workers’ comp insurance plan. Not having workers’ comp insurance can be devastating to your business from both a legal and financial standpoint. To protect yourself, look for an insurance provider that is well rated and focuses on providing excellent customer support, since these carriers will be able to guide you on the type and amount of coverage you need.
Working to improve employee morale in general may also help: employees who are encouraged to take breaks and are not asked to work long hours without rest will be less fatigued and less likely to make the kinds of mistakes that can cause accidents. Employees who take pride in their work and have a good relationship with employers are also more likely to avoid careless behavior and risk-taking that can contribute to accidents.
And in the event that there is an accident and an employee does file a claim, it’s important that you get ahead of the issue by maintaining a good relationship with that team member. Check in with them frequently and discuss when and how they will be able to return to work if they are able. Never retaliate against an employee who has filed a claim. Instead, try to keep the channels of communication clear and create a plan for the employee to get back to their job, if possible.
Don’t risk your business on inadequate workers’ compensation insurance. Cerity will provide a cost-effective, hassle-free workers’ comp quote for your business in a matter of moments. Simply go to our free online quote tool. Tell us a little bit about your business to get an affordable rate, and you can buy a policy online in minutes to cover you for the year ahead.