The Hidden Costs of Workers’ Compensation Claims

The Hidden Costs of Workers’ Compensation Claims | Property & Casualty

Behind every workplace accident, numerous hidden costs can be very expensive. Indirect and hidden costs are unpredictable, difficult to control and tough to quantify. Hidden costs are estimated to be seven times greater than direct costs (e.g., wages). Since hidden costs are not easily identified, they are not considered in a workers’ compensation claim.

Examples of hidden costs include:

  • Employee downtime
  • Coworker assistance
  • Training
  • Equipment stoppage
  • Damaged products & materials
  • Lost orders & sales
  • Employee turnover

Employee Downtime

After an accident, your company may lose the productivity of the injured employee. Many organizations forget to calculate the potential downtime of other employees as well. Coworkers may be curious and worried, spending work time discussing the incident and its ramifications. Serious accidents could affect production for some time. Employees may begin questioning their safety with concerns they could be at risk. They also may take more time to perform tasks because they are anxious about potential injuries.

In addition, supervisors or other managers will dedicate time to investigating the origin of the accident and completing incident reports. These often OSHA-required steps take that individual away from other revenue-producing activities and management responsibilities.

Coworker Assistance

Dependent on the seriousness of the employee’s injury, a coworker may be utilized to transport injured employees for medical attention. This may include the initial hospital or doctor’s visit in addition to follow-up appointments. This can significantly disrupt your workflow with multiple employees being out.

Training

Your company may train an existing employee or a temporary employee when the injured employee is out for an extended period. In most cases, the replacement worker is not as productive and more likely to make mistakes. Unfortunately, this increases the likelihood of additional workplace accidents.

Your business could decrease expenses by evaluating the cost-effectiveness of alternative scenarios (e.g., retraining existing employees, temporary workers, outsourcing). Regardless of the direction, your company loses financially by either replacing or training employees or suffering lost productivity

Effective loss prevention management plans might include preparations for backup, cross-training or job outsourcing for every employee’s job before an accident.

Equipment Interruption

Accidents can result in damage to equipment (e.g., forklifts, delivery vehicles) and could cost the employer additional money from repairs, downtime and decreased production. Unfortunately, sometimes equipment cannot be repaired. Your company would be forced to accept unwanted debt to acquire replacement equipment. Your company now has an additional expense, new debt and useless equipment.

Damaged Products & Materials

Products and materials may also need to be replaced or repaired if damaged or destroyed in an accident. This could cause major problems if they are expensive or not easily available. This problem magnifies if customers are expecting delivery on a specific date, and the deadline cannot be met.

Materials or products may need to be shipped in from other warehouses or wholesalers/manufacturers, which takes time. Long delays may result in irate customers because goods are not delivered on time.

Lost Orders & Sales

Delivery delays are a perfect example of an accident’s ripple effect, which creates far-reaching consequences. The worst-case scenario is a company losing customers and market share because it failed to meet its delivery commitments. The outcome could be disastrous in some companies.

Deciding what customer goodwill, market share and key accounts are worth will probably raise a company’s perceived value of an effective loss prevention program.

Employee Turnover

Returning your experienced and skilled injured employee to work will prevent your business from losing a valuable resource. Although they may not be able to do their regular job right away, getting that employee back to work sooner will also get them back to their regular job sooner. Returning an injured employee to work can reduce employee turnover and costs related to replacing an employee. It also shows that you see them as a valuable resource, which should make them eager to return to their job as soon as medically possible.

Safety & Loss Prevention Programs Can Eliminate Hidden Costs

Don’t let accidents destroy your business. Many employers are hesitant to implement safety and loss prevention programs because they think they are expensive. However, if you take the hidden costs outlined above into account and consider how much accidents could affect your business, you will see the savings are well worth the time and effort.

Safety and loss prevention go together. Both can impact a company’s costs, contribute to workers’ compensation claims, and affect a worker’s ability to effectively perform job duties. Both programs also play a role in preventing injury and illness, and therefore, costs. By implementing these programs, you not only protect your workforce, but also protect your organization.

We’re Here to Help with Workers’ Compensation

Indirect and hidden costs are unpredictable, difficult to control and tough to quantify. Because hidden costs are not easily identified, they are not considered in a workers’ compensation claim. For more information on risk control, prevention and safety, connect with a member of our team

The Hidden Costs of Workers’ Compensation Claims | Property & Casualty https://www.cbiz.com/Portals/0/Images/GettyImages-1304316253-1.jpg?ver=LHq7PEkhX5fdT9tAkstdWA%3d%3dIndirect and hidden costs are unpredictable, difficult to control and tough to quantify. Because hidden costs are not easily identified, they are not considered in a workers’ compensation claim. 2022-11-21T18:00:00-05:00Indirect and hidden costs are unpredictable, difficult to control and tough to quantify. Because hidden costs are not easily identified, they are not considered in a workers’ compensation claim. Risk MitigationProperty & Casualty InsuranceYes