Light duty and kept on salary in this economy – Are you crazy?

Light duty and kept on salary in this economy – Are you crazy?

By Greg Kabacy, MBA, ERNWest

When the economy turns south, workers’ compensation costs and claims often fall well below the radar. Enticing customers to spend money, or trying to figure out ways to retain employees tends to dominate a business owner’s thoughts, instead of who may be on light duty for the day.

To begin, a business owner must understand their workers’ compensation premiums. In Washington state, experience modification factor (EMR) can greatly affect the amount of premium paid to the state. Did you know that an employer can receive an EMR well below what they could normally achieve on their own by having three straight years with no time loss claims?

By keeping time loss off your workers’ compensation account you can achieve 10 percent—25 percent savings every year in your Labor & Industries (L&I) premiums.

If the prospect of providing light duty or keeping an injured worker on salary is still too much to bear in today’s economy, keep this in mind: let’s say you already have a time loss free discount rate (three years of no time loss claims) from L&I, and have an individual on light duty from an injury. Business slows down. Your first instinct is to get rid of your excess non-producing employees. You may be tempted to let the person who is on light duty go, and have L&I cover his/her costs with time loss payments. If you allow that individual to go out on time loss, it is almost guaranteed that your rates will increase by as much as 25 percent in the next year or two. That adds up to a lot of money.

Before making a hasty decision to allow L&I to pay an injured worker time loss compensation, carefully consider what impact that may have on the future of your company.

Are we advocating for you to keep all of your injured workers on light duty or salary? No. This is not an achievable goal depending on various circumstances. But keeping a person on salary for two to four weeks will buy you some time to do one of two things: first, you can use that time to determine if you can provide light duty to that individual and bring them back to work in a meaningful capacity, and second, you can determine how bad the injury is. If it appears the person is going to be off work for longer than 30 days, keeping that person on salary may not necessarily the best option.

Do you feel like you can’t afford to bring an employee back to light duty? Washington state now has the Stay At Work (SAW) program to help you. This program can provide up to 50 percent of a worker’s wages for up to 66 days, while they are on light duty. The funding for this program is actually generated from your own rates, so if you’re paying for it, why not use it?

Looking for more incentive to bring an injured worker back to light duty? Did you know that if you can prevent time loss compensation from being paid out on a work related injury claim, the Department will pick up part of the worker’s medical costs? In the current calculation of EMRs, employers are receiving up to a $2,460 credit on each medical-only claim.

Let’s go through a short example to illustrate this. You have a claimant who has gone to the doctor and is excused from work for five days. Instead of allowing L&I to pay time loss, you either provide this worker with light duty at full pay or provide Kept on Salary (KOS). The total medical costs on his claim add up to $1,500. Applying the credit of up to $2,460 because you kept time loss off the claim, the total cost to your company and against your premiums is now $0. If, however, you allowed even one dollar of time loss to be paid, this claim would be charged against you for the full amount of medical and indemnity costs.

Again, it is easy, but may be short-sighted to look at the near term effects of cutting an injured worker loose. By focusing on the long-term health of your company, and determining what course of action will keep you competitive in the future, light duty and Kept on Salary can make business sense. n

ERNWest, a Federal Way-based workers’ compensation risk management provider, provides claims management services for the WRA’s Retrospective Rating program. For more information on joining WRA’s Retro program visit or call 800.225.7166.

(Source: Washington Restaurant Magazine, 2013)

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