1. Containing Costs with a Strategic Approach to Workers Compensation Insurance
As the economy slowly continues to turn, small business owners across the country remain concerned
about controlling costs and minimizing risks. Now more than ever, small business decision-makers must
continuously evaluate cost structures and work to enhance operational efficiencies amid a series of
ongoing challenges: limited access to credit and loans, increasing costs, changes in health care
legislation and economic uncertainty. These are issues small businesses have very little control over. But
even during these challenging times, there are steps small business owners can take to control costs,
which can help drive growth in the long-term.
Some commonly overlooked costs impacting the nation’s younger businesses are those associated with
workers’ compensation insurance, which is often misunderstood and frequently thought of in the same
terms as other insurance products. With workers’ compensation, there are areas where significant cost
savings can be realized, for example by improving workplace safety or identifying and preventing fraud.
The Occupational Safety & Health Administration (OSHA) estimates direct workers’ compensation costs
alone run nearly $1 billion per week, which include workers’ compensation payments, medical expenses
and costs for legal services. And when indirect workers’ compensation costs such as lost productivity,
training replacement employees and equipment repairs are considered, the costs are multiplied
exponentially. Whether direct or indirect, businesses ultimately bear the brunt of these costs in the form
of increased insurance rates, rising premiums and productivity losses. Not just a financial burden on big
businesses, this issue significantly impacts America’s small businesses considering the U.S. Small Business
Administration estimates there are 29.6 million small businesses, which employ more than half of the
country’s private sector workforce.
For this reason, it is critical that business owners understand that a strategic approach to workers’
compensation is just as important to cost savings as smart tax planning. Small scale businesses should
maintain a long-term workers’ compensation perspective focused on value, not just lowest cost. They
should be sure they have access to resources and value-added services that both protect their businesses
today and also position them to potentially lower their workers’ compensation rates in the future. Taking
a closer look at workers’ compensation can actually help small businesses not only better manage their
risk, but also effectively manage costs, which is just smart business no matter what the economic
climate. By taking proactive, common sense measures toward workplace safety, small business owners
may greatly reduce their risk of workplace injury-related costs.
As background, workers’ recompense insurance covers employers for their statutory and legal obligations
for employee expenses that are a direct result of on-the-job injuries or illness. While plans differ within
and among states, workers’ payoff benefits can include weekly payments in place of wages and
reimbursement for payment of medical and rehabilitation expenses. Depending upon the jurisdiction,
business owners can obtain their workers’ compensation protection from private insurance companies,
state insurance funds, self-insurance or self-insured groups.
There are basic, day-to-day operational measures that small business owners can take to mitigate the
risk of workplace injury and related costs. Establishing policies, procedures and rules surrounding
workplace safety provides employees with the necessary tools to do their jobs safely. Enforcing safety
rules through the use of workplace audits, safety meetings and annual training are proven ways to
reduce the risk of claims that can ultimately cost a business thousands of dollars.
Regardless of the rate of economic recovery or pending legislative policy, small businesses should focus
their energy on the variables they can control. Taking a smart, informed approach to workers’
compensation insurance not only will protect valued employees and minimize risk for the long term, it
also protects small businesses from taking on new costs at a time of economic uncertainty when they are
most vulnerable.

2. Hale Johnston is Senior Vice President, Regional Manager of the Pacific Region for EMPLOYERS® .
Additional information can be found at www.employers.com