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Six safeguards to control Workers’ Compensation costs in a down economy

The current economic crisis has many employees worried about their future. Feeling stressed over financial matters, employees can be preoccupied and become less productive and attentive to their job, increasing the risk of an injury. Furthermore, anecdotal evidence suggests that fear of layoffs causes claims to escalate as ill-intentioned employees look to Workers’ Compensation as a way to sustain their income.

Here are six safeguards to control Workers’ Compensation in a down economy:

1. Ramp up communication efforts
Employees want reassurance because there is bad news everywhere. According to Richard Guinn, practice leader in communications at Watson Wyatt Worldwide, most employers either provide too much or too little information during a crisis. The important thing is to listen to employees and respond. Employees working under leadership that is truthful, fair and provides support and motivation, have lower levels of stress, anxiety and depression.

Although the message about the economic health of the company best comes from the top, immediate supervisors and managers need to play an active role in reinforcing this message. Studies have shown that workers trust their immediate boss more than they trust the organization’s senior leaders. In addition, they are closest to the employees and should be attuned to growing uneasiness or rumors.

2. Rigorously monitor claims frequency
During an economic downturn, it is particularly important to guard against abuse. While employers should always use analytical tools to monitor the volume and type of claims, identifying up ticks in the volume and patterns of claims will help flag potential abuse. Employers suspecting abuse should immediately discuss the situation with their WorkComp advisor.

3. Watch job classifications
Reductions in the workforce can result in shifting job responsibilities. Workers can be repositioned while others take on duties from those who have left. Be sure that your job classifications are up-to-date.

4. Stay the course with your injury management plan
In all economic environments, there is a constant about Workers’ Compensation – every day an employee is off the job costs the employer money. Although shifting priorities and a reduced workforce strain resources, an unwavering focus on returning every injured employee safely to work as expeditiously as possible is best for the employee and the employer. The longer an employee is out of work, the harder it is to get them back to work and the more costly it is for the employer.

5. Focus on health
If you have not already established a relationship with a qualified occupational medical provider do so now. Find physicians who follow ACOEM (American College of Occupational and Environmental Medicine) and who will take the time to understand your needs. Although it may sound paradoxical, quality, not price, should govern the choice. Seemingly low prices from managed care organizations actually can increase costs.

Do whatever you can to maintain and even expand health-related perks such as wellness programs, fitness opportunities, screenings, healthy food choices etc. as these will help to keep your employees motivated and productive.

6. Provide financial education
Even in good times, managing finances is daunting for many employees. In this time of volatility and uncertainly, they feel overwhelmed and burdened. Holding meetings on reducing credit card debt, maintaining/buying a home, saving for college and investing in tough economic times will show support and help reduce stress. Allowing spouses to attend by scheduling meetings after business hours can also be beneficial.
Tips for managing layoffs
When layoffs are imminent, employers need to vigilant in both controlling claims rates and disability duration. A decline in premiums as a result of a reduced payroll can be more than offset by a rise in claim costs. The resulting increase in the Experienced Mod will have a long-term adverse effect on the company’s bottom line.

Communicate in timely manner
When accurate and complete information is available about layoffs, employers should be honest and direct with their employees. Telling employees too soon can cause confusion and anxiety, whereas waiting too long breeds rumors and misinformation. Timing is critical.

Keep accurate and detailed records
Since it is possible for Workers’ Compensation claims to increase when layoffs appear imminent, employers need to be especially diligent in documenting equipment condition, housekeeping inspections, and industrial hygiene as well as work schedules, accident reporting and investigations. Videotaping work areas and activities can also be helpful.

Investigate accidents immediately and thoroughly
Accident investigation is always important in controlling comp costs and takes on increased importance when ill-intended employees view Workers’ Comp as an escape from unemployment. Get signed statements from the injured employee and witnesses, interviewing each person separately. Immediately remove faulty equipment from use and address any hazards that may have caused the accident.

Signed verification forms
Have employees sign a form verifying whether they have experienced any accidents on the job that have not been reported. Such documents can be valuable should claims arise once employment has ended. Contact us for sample of form.

Provide employee assistance programs
If employees feel the employer is supportive and concerned about their well being, they are less likely to abuse the system.

Red flags of fraud
While most claims do not involve fraud, look for the red flags that a claim might require additional scrutiny. Click here for Red Flag Fraud checklist

Know the law
The Worker Adjustment and Retraining Act (W.A.R.N.) imposes certain obligations on employers with 100 or more employees who shut down or downsize their operations. The EEOC carefully monitors discriminatory actions in layoffs. In addition there may be state laws that apply. Have an attorney review all aspects of the reduction in force procedures.

Communicate goals – support those who are staying
During economic downturns, the need to keep and motivate the best talent remains. Layoffs are emotionally charged events, even to those who maintain their jobs. Clearly communicate the goals associated with the layoff, the structure of the emerging company and the employees' continuing role.