Consider the following sources of income and why they might be a disincentive to return to work:
Double Dipping
Many employers have group disability insurance policies provided by the company. Employees who receive workers’ compensation may also begin receiving disability payments. This may also happen with personal insurance policies. This double income means that the worker’s at-home pay exceeds their at-work pay. When the company offers this employee a job with lighter duties at full salary during their recuperation, they have a financial incentive to turn it down. While workers’ personal insurance is their own, employers should deduct workers compensation from other duplicative company payments. This discourages malingering.
Another way that employees may double dip is by receiving off the books income for odd jobs while collecting benefits. Workers comp is designed to compensate people for lost wages after they suffer a job-related injury. It is also used to pay for medical care and rehabilitation for workers hurt on the job. Individuals must be legitimately unable to work to receive compensation. In some cases, individuals are criminally charged with workers comp fraud. In other cases, criminal charges included grand larceny and offering a false instrument for filing.
Unemployment
In some states, employees on workers’ compensation qualify for unemployment benefits under certain circumstances. To prevent this, companies should offer all injured workers transitional jobs they can perform even with their physical restrictions. Under the eligibility rules, workers who refuse such offers will likely not be deemed unemployed. Some states allow an offset (reduction) in workers comp benefits for employees drawing unemployment compensation. In many states, workers must be ABLE and AVAILABLE to work to receive unemployment benefits. In these states, challenge any claim of an employee seeking unemployment benefits while receiving workers’ comp benefits. Learn how your state handles unemployment compensation in conjunction with workers compensation.
Social Security
When an injured employee receives a disability rating that classifies the employee as permanently and totally disabled, the employee may be eligible to receive both workers compensation permanent total disability benefits and social security disability benefits at the same time. If the injured employee was allowed to receive both workers compensation disability benefits and social security disability benefits at the same time, the employee would be receiving more compensation than if they were still working. To prevent this duplication and overpayment of disability benefits, Social Security and state workers compensation statutes have offset provisions reducing the amount paid to the disabled employee. The company should make sure that these offset provisions are in place before the employee incurs a substantial overpayment.
Pension Pay
Older workers who receive workers’ compensation benefits may retire during their convalescence and can continue to receive workers’ compensation benefits. The remedy is to revise pension plans that do not offset workers’ compensation by retirement pay. This is different than the offset provisions built into the Social Security Disability laws.
Grossing Up
Some employers offer “occupational injury supplements,” which can raise workers’ compensation benefits from two thirds of salary to full salary. But, given that workers’ compensation is tax fee and employees at home save on commuting and other work-related costs, a full salary is more lucrative for workers on leave than for workers at work. Thus, companies must carefully design any programs for supplemental pay to avoid any disincentives to working.
Additional Collateral Sources
Employers have many other policies that discourage injured employees from returning to work. Open-ended transitional duty jobs and allowing employees on workers’ compensation to accrue sick time can deter their desire to return to work.
The Solution
Eliminate double dipping where possible. This requires advance planning so company-paid policies are structured to allow offsets. Have all departments review benefits to make sure these perks and policies do not discourage employees from returning to work as soon as they are able.
Subrogation is the process and the right of the workers’ compensation insurer or the self-insured employer to recover the money paid on a workers’ compensation claim from another party when the other party is responsible for the employee’s injuries. In civil law, the principle of negligence guides and determines who should pay for damages caused to another. Basically, the simplest way of putting it “if someone else is at fault, they should pay for it.” Every workers’ compensation claim should be reviewed for subrogation potential when it is reported. Unfortunately, most workers’ compensation adjusters are experts in workers’ compensation but have little or no knowledge of liability claims. This results in the work comp adjusters frequently missing opportunities for subrogation.
The following are situations where the employer should seek subrogation:
Lawsuits
While workers’ compensation statutes prevent workers injured on the job from suing their employers, they can still sue others. Someone hurt while emptying garbage into a dumpster, for example, can sue the dumpster owner and manufacturer. A worker receiving a court award or settlement and comp benefits gets paid twice for the same injury. Most states allow insurers or employers to seek reimbursement for sums spent on workers’ compensation but I have seen many cases where this is not done.
Motor Vehicle Accidents
In some states, employees who are injured when driving on company business may receive both workers’ compensation and medical benefits from their no-fault auto insurance policies. To prevent this redundancy, no-fault benefits should be deducted from workers’ compensation benefits, where permitted by state law.
Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: [email protected].
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