You May Be Inviting Higher Workers Comp Costs

When employees can make more staying home than working, there is very little incentive to return to work.



Collateral Source Benefits


A collateral source benefit acts as a “collateral source” of income or perk. It creates a situation where an injured employee has an incentive NOT to work.


While providing certain benefits can foster employee loyalty for many productive years, sometimes these benefits can be offset without a complete injury management program and excellent employee communication.


Involve all departments in designing, administering and maintaining policies. In a large company, human resources, labor and industrial relations, and employee benefits and compensation as well as workers’ comp departments must all be involved. Incentives to remain at and return to work must be built into management systems. Disincentives must be removed from all direct and indirect sources. Substantial savings can be achieved when a company coordinates its salary, benefits and compensation programs so employees are not rewarded by staying out of work.


The following are employee perks that may form disincentives to returning to work:


Salary and Wage Continuation

Some companies pay 100 percent of salary instead of an employee collecting workers’ compensation for short term injuries.


Occupational Injury Pay Supplements

Some companies pay supplemental benefits to make up the difference between workers’ compensation benefits and regular earnings.


Open-Ended Job Return

Holding open an employee’s job indefinitely does not encourage them to return to work as quick as possible. Instead, employers should hold jobs open for a specific time period, such as six or nine months.


Vacation and Sick Time

Companies frequently allow vacation and sick time to accrue for employees on workers’ compensation. Some even allow employees to “borrow” more sick time if they need to stay out of work longer.


Short-Term Disability

In some companies, disabled employees receive STD benefits after six weeks. However, the standard definition for the disability policy may differ from that of workers’ comp, allowing an employee to collect both. Combined with some personal insurance policies, this double income means that the worker’s at-home pay exceeds their at-work pay. Eliminate double dipping. Although an employee’s personal insurance is their own, employers should deduct workers’ compensation from other duplicative company payments. Otherwise this encourages malingering.


Perk Continuation

Employers often maintain ancillary benefits and privileges such as car allowances, club and professional dues, company store privileges and periodical subscriptions for employees on leave.


Loan Protection Policies

Individual insurance policies are available to pay mortgages and consumer loans such as car loans and credit card debts in the case of a disability. Credit disability insurance may eliminate house and car payments while being unable to work.


Unemployment Compensation

In a few states, an employee receiving workers’ comp also can qualify for state unemployment benefits under certain circumstances. To prevent this form of double dipping, 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 not be deemed unemployed as they must be both able and available for suitable work.


Pension and Retirement Plans

If these plans do not allow for offset of workers’ comp benefits, an employee can receive workers’ compensation benefits and a full pension.


Legal Actions

An employee can file a product liability action against the manufacturer of a product that injured him to collect damages. If the employee was injured in a motor vehicle accident, there may be insurance proceeds involved. The employer should seek reimbursement for workers’ comp payment from any such settlement.



To prevent driving up your costs, ask yourself: What Benefits Are Injured Workers Getting by Not Working?


Many companies fail to look closely enough at their internal wage and benefits structure when looking to reduce workers’ compensation costs. Look for these collateral income sources that provide built-in disincentives to remaining injury-free or returning to work. Even such things as reduced childcare and commuting expenses while at home can be disincentives to returning to work.


If not properly coordinated, a company’s employee benefit and compensation programs may inadvertently serve to extend workers’ compensation absences.



Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact:



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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.


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