Financial Implications of a Workplace Injury

Posted by on October 9, 2013 in Business Financing, Business Insurance [ 0 Comments ]

Financial Implications of a Work-Related Injury

Millions of work-related injuries happen across the nation every year adversely affecting  the harmed employee, their family, the economy and the employer. The financial impact of a workplace injury for a company is rather high. In 2003 alone, employers spent approximately $51 billion on lost wages and medical care for workers hurt on the job, including doctor and emergency room visits, medications, medical bills and rehabilitation costs.

Although these direct costs are generally paid for by workers’ compensation insurance, they are  ultimately the employer’s responsibility and could potentially result in a significant monetary loss. However, indirect costs are also a financial burden, including production loss, re-hiring, litigation costs and Occupational Safety and Health Administration (OSHA) fines. Of course, all of these costs will differ depending on the severity of the injury.

Related: Choosing the Right Insurance for Your Small Business

Major vs. Minor Injuries

Workplace injuries range from minor to catastrophic. According to OSHA standards, minor injuries are those that require first aid treatment only and do not involve medical treatment, restriction of work responsibilities, or loss of consciousness or motion. They include paper cuts, minor scratches and scrapes. Major injuries, on the other hand, include everything from sprains and broken bones to severe trauma and amputations. It is important that all injuries are reported, because even minor damages can become major problems down the road. The more severe the injury, the more costly it is for the employer.

How Companies Compensate Employees

There are two types of settlement options after a major injury: lump-sum settlements and structured settlements. A lump-sum settlement provides a one-time payment, while a structured settlement provides scheduled payments over time.

Annuities and/or structured settlements have become common solutions for workers compensation claims since 1997, when Congress amended the federal tax code to promote the utilization of structured settlements for work-related injury claims. A structured settlement allows an injured employee to receive payments tailored for his or her long-term needs and provides him or her with a steady, tax-free income- an option appealing to most injured workers.

Not only do injured employees benefit from settling a worker’s compensation claim with a structured settlement, but the employer benefits as well. It can significantly lower the overall cost of the claim, possibly resulting in a much lower insurance premium when the underwriter calculates future costs. A structured settlement can also alleviate the employer’s future responsibility for the claim and eliminate the risk of litigating a major injury claim through the state’s workers compensation system.

Related: How to Find Affordable Small Business Health Insurance for Your Employees

Many workplace injuries can be prevented with careful attention to safety procedures and by taking the appropriate steps to avoid work-related accidents. To prevent major costs because of workplace injuries, all employees should be aware of and adhere to safety guidelines provided by their employer.

 (Image via shutterstock)

Kaitlyn Fusco is a content writer for She combines her interests in writing and overcoming debt to inform the public about issues related to credit, debt, annuity and personal finance.

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