10 Mistakes That Blow Up Workers’ Comp Costs (and How to Avoid Them)

Workers’ compensation is often misunderstood as a fixed cost of doing business—something employers have to accept, manage passively, and simply write checks for. But that mindset couldn’t be further from the truth.

In reality, workers’ comp costs are one of the most controllable expenses in your organization. Unfortunately, many employers unintentionally drive their own costs sky-high through avoidable mistakes. If you’re serious about lowering premiums, reducing claim durations, and improving outcomes for injured workers, start by identifying and correcting these ten common pitfalls.

1. Failing to Take Control of the Process

One of the biggest mistakes employers make is assuming workers’ comp is “someone else’s job.” The carrier, the TPA, the broker, the doctors—they’re all supposed to handle it, right?

Wrong. Everyone in the system ultimately works for the employer. When the employer steps back and fails to lead, no one drives outcomes. Employers must take ownership of claims management, set expectations, and actively coordinate their team.

Avoid It: Create a structured program, designate internal responsibility, and build partnerships with stakeholders who are aligned with your goals.

2. Lack of Management Buy-In

If leadership doesn’t understand or support workers’ comp initiatives, your program is doomed before it starts. Lack of buy-in often results in underfunded programs, minimal accountability, and missed opportunities to improve.

Avoid It: Educate senior leadership on the financial and operational impact of workers’ comp. Show them the ROI of proactive management, and enlist their support early.

3. Operating Reactively Instead of Proactively

Too many organizations operate in firefighting mode—dealing with claims only when something goes wrong. They have no plan, no goals, and no system in place.

Avoid It: Treat workers’ comp like a strategic initiative. Set benchmarks, monitor performance, and proactively train your supervisors and staff before the next injury occurs.

4. Ignoring the True Cost of Claims

Most employers look only at direct costs—wages and medical expenses. But the hidden indirect costs (lost productivity, temporary labor, decreased morale, paperwork, and penalties) can be 2 to 10 times higher.

Avoid It: Use tools like OSHA’s “Safety Pays” calculator to understand the full impact. This knowledge helps drive urgency and management engagement.

5. Understaffing Your Claims Program

Some employers assign one person to manage hundreds of claims with no additional support—while other departments are fully staffed. This imbalance leads to poor oversight and costly mistakes.

Avoid It: Allocate resources according to the size and complexity of your claim volume. Consider internal roles and external vendor support to stay ahead.

6. Enabling Policy Disincentives

Unintended policy structures can sabotage return-to-work efforts. For example, offering full salary while out on workers’ comp can remove any motivation to return.

Avoid It: Review your leave policies and union contracts for hidden disincentives. Ensure your return-to-work policies are clear, mandatory (when medically appropriate), and supported by transitional duty options.

7. Poor Communication (or None at All)

An injured employee who doesn’t hear from their employer is far more likely to hire an attorney. Silence breeds mistrust and prolongs recovery.

Avoid It: Train supervisors to respond with empathy and maintain regular communication. A simple phone call, brochure, or check-in can drastically reduce litigation and claim duration.

8. Hiring Based on Price Alone

Choosing the lowest-cost TPA or vendor often leads to understaffed teams, poor service, and costly delays. The cheapest provider may end up being the most expensive in the long run.

Avoid It: Evaluate vendors based on outcomes, support, staffing ratios, and alignment with your strategy—not just cost.

9. Hiring the Wrong People for the Job

If you hire someone for a physically demanding role without verifying they can safely perform it, you set them—and yourself—up for failure.

Avoid It: Implement pre-employment physical testing and functional capacity exams. Establish a clear baseline for each new hire so you can manage future injuries more accurately.

10. Believing Workers’ Comp Is Just a Cost of Doing Business

This mindset is perhaps the most damaging. If you believe you can’t influence your workers’ comp costs, you won’t even try—and you’ll leave thousands (or millions) on the table.

Avoid It: Shift your mindset. Workers’ comp is not just a cost center—it’s a strategic opportunity to protect your people and your bottom line. With the right approach, you can control outcomes and dramatically reduce expenses.

Final Thoughts: Your Path Forward

Every mistake listed here is fixable. With education, intentionality, and a team approach, you can transform your workers’ comp program from reactive and expensive to proactive and efficient.

Start by asking:

• Where are we falling into these traps?

• What small step can we take this month to move toward a better system?

• Who else on our team needs to be brought into the conversation?

When you treat workers’ comp like the controllable system it is—not a black hole of costs—you start unlocking serious savings and better outcomes for your people.

Michael Stack, CEO of Amaxx LLC, is an expert in workers’ compensation cost containment systems and provides education, training, and consulting to help employers reduce their workers’ compensation costs by 20% to 50%. He is co-author of the #1 selling comprehensive training guide “Your Ultimate Guide to Mastering Workers’ Comp Costs: Reduce Costs 20% to 50%.” Stack is the creator of Injury Management Results (IMR) software and founder of Amaxx Workers’ Comp Training Center. WC Mastery Training teaching injury management best practices such as return to work, communication, claims best practices, medical management, and working with vendors. IMR software simplifies the implementation of these best practices for employers and ties results to a Critical Metrics Dashboard.

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

Injury Management Results (IMR) Software: https://imrsoftware.com/

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