Workers’ Compensation Claim Costs – Direct and Indirect

Workers’ compensation claims have a variety of different costs associated with them. Some of these costs are expected costs, while others are unexpected. Here’s the difference between these terms:

  • Expected costs are those that are covered by workers’ compensation insurance. Such expenses are commonly referred to as direct costs.
  • Unexpected costs are those that workers’ compensation insurance does not cover. These expenses are commonly referred to as indirect costs.

Examples of direct costs include employee wage benefits such as disability, medical payments, vocational rehab costs, death benefits, and legal fees. All of these are usually covered by your workers’ compensation insurance.

Examples of indirect costs include wage and hour costs (work by others to compensate for injured worker’s absence), HR support expenses, claim investigation costs, hazard mitigation costs, production deadline extensions, OSHA fines, insurance premium expenses, repair costs, workplace culture concerns, and reputational struggles.  The best way to control these costs is to be proactive before and after the injury.

How does a company reduce both direct and indirect costs of workers’ compensation claims? First of all, the foundation for reducing claims is to invest in your safety programs. If there is a claim, be proactive in managing the claims process, communicate with the injured worker and engage with them on a return-to-work plan.

Overall, by reducing employee injuries, employers can help create a positive work culture and lower workers’ compensation expenses— thus minimizing both direct and indirect costs.

Contact Consolidated Insurance + Risk Management to discuss your workers’ compensation needs.