Return to Work Programs – Why You Need One

By Meghan Dickerson, CET, Workers Compensation Risk Advisor, Cavignac & Associates

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Workers compensation insurance rates in California have been decreasing year after year since their peak in 2003, when the average charged rate per $100 of payroll was $6.29. In 2009, that rate was $2.10, a decrease of nearly 70% from peak rates. In 2009, the insurance industry’s combined loss ratio for workers compensation was 138%. This meant that for every dollar of insurance premium charged, the insurance companies spent $1.38 on claims and other expenses. The situation was much the same in 2010, 2011 and 2012. In other words, the workers compensation market has been underpriced for several years. Insurance companies have not charged enough premiums to cover their costs, and those companies are now looking to correct that situation by increasing rates. Most insurance companies are increasing their base rates by 15-25% in 2013, before the application of any credits, debits, or the experience modification. This could mean big increases in workers compensation premiums for employers, even if losses have remained flat.

As rates continue to rise, it will become increasingly important for employers to control costs associated with workplace injuries and illnesses. One of the biggest, yet most controllable, costs associated with workplace injuries and illnesses is lost time from work due to disability. The most effective way to have a favorable impact on these costs is to implement a Return to Work (RTW) program.

What is a Return to Work Program?

A Return to Work (RTW) program, simply put, means allowing workers, who are unable to perform their usual and customary job duties due to an injury or illness, to return to work in a temporary, limited, or light duty capacity while they recover. Disabled employees can be brought back to work in their current position with modifications, or placed in an alternate position until they are able to return to full capacity. RTW programs can provide full- or part-time work at full or partial wages, with the workers compensation insurance company making up any difference between the employee’s pre-injury wage and the pay earned while assigned to modified duty. In some instances, employers with limited ability to offer modified or alternate work can reap the cost saving benefits of RTW programs by contracting with a non-profit organization to provide safe alternative work within the employee’s restrictions while the employer continues the employee’s pay.

Why Implement a Return to Work Program?

Generally, the longer an injured worker is out of work due to disability, the less likely they are to return to work at all, and the more expensive the insurance claim becomes. In fact, an employee who is out of work for six months has less than a 50% chance of returning to gainful employment. If lost time reaches one year, the chances of successfully returning to work drop to 10%. An employee who is released to work with restrictions, but who is not brought back to work, is eligible for the temporary disability rate of two thirds the employee’s average earnings, tax-free, until one of the following occurs:

  • The treating physician determines the employee has reached full capacity;
  • The treating physician determines the employee has reached the plateau known as ‘maximum medical improvement’; or
  • The employer has offered reemployment within the employee’s restrictions.

The current maximum weekly temporary disability rate in California is over $1,000, with a cap of 104 weeks of payments within a five-year period. Not bringing an injured employee back to work can add thousands of dollars to the cost of the claim, and contribute painful points to the experience modification—all of which translate into higher premiums. Sometimes these additional premiums can cost a company up to three times the amount of actual disability payments made by the insurance company. In addition to lowering the exposure to the cost of disability payments, Return to Work programs have many other benefits, including:

  • Increasing employer/employee relations and communications;
  • Making employees feel valued, thereby reducing claim litigation and fraud rates;
  • Keeping employees active, hastening the healing process and reducing the need for medical treatment;
  • Maintaining an experienced workforce;
  • Reducing turnover and mitigating the need for expenses related to replacing injured workers; and
  • Improving employee morale, therefore reducing the costs associated with presenteeism.

Aside from the above workers compensation considerations, employers may also have an affirmative obligation under the Americans with Disabilities Act and/or the Fair Employment and Housing Act to provide a reasonable accommodation that would allow a disabled employee to perform the essential functions of his or her job. Failure to engage in an interactive process with disabled employees to determine whether a reasonable accommodation is possible—and, if so, to provide it—could expose an employer to potentially expensive discrimination litigation.

How Should a Return to Work Program be Implemented?

Return to Work programs can be formal or informal, across the board or on a case-by-case basis, designed to last a specific period of time, or created to last indefinitely. The most effective Return to Work programs, however, will follow a basic set of best practices.

  1. Develop a written program that outlines the company’s philosophy regarding accommodation of medical restrictions and the procedures that should be followed by the company and the employee.
  2. Document the fact that accommodations will be made when reasonable, that the program is temporary and transitional in nature, and that each case will be reevaluated at specific time intervals, such as every 90 days, or as restrictions change.
  3. Implement the program consistently.
  4. Thoroughly communicate the procedures and philosophy with all employees, with buy in from senior level management. Create a stay-at-work culture.
  5. Ensure that all parties, including the employee and his supervisor, are aware of the program and the procedures they are expected to follow.
  6. Develop written job descriptions which outline the essential functions of each position to be used when engaging with employees and their physicians regarding medical restrictions.
  7. Pre-identify modified duty positions. Develop written descriptions of these positions which can be provided to physicians for approval.
  8. Hold supervisors accountable for providing work within the employee’s restrictions, ensuring the employee does not exceed those restrictions, and ensuring a supportive environment where the employee perceives his contributions as valuable.
  9. Hold the injured employee accountable for providing up-to-date medical information about his work capabilities, and for only performing that work which can safely be done within the medical restrictions.
  10. Maintain open communication between supervisors, the employee, the medical case manager, the physician, and the claims adjuster on the employee’s progress.
  11. Reevaluate the program in its entirety at least bi-annually to determine its effectiveness, evaluate the cost savings, and ensure compliance with current labor laws and regulations. Make adjustments as needed.

The most effective Return to Work program will be one element of a comprehensive injury prevention and claims management strategy that involves: a strong safety program, immediate claim reporting and accident investigation protocols, a strong occupational clinic relationship, a formal first aid program, and regular claims progress benchmarking.


The costs associated with disability due to work-related injuries can be huge! An employer can proactively manage those costs by keeping injured employees engaged and working productively while they recover. Return to Work programs help to drive dollars to the bottom line by reducing the direct costs associated with lost time injuries, which include: increased disability payments, increased medical payments, increased litigation rates, and increased insurance premiums. Return to Work programs also effectively reduce the indirect costs of lost time injuries such as lost productivity, employee turnover, and low employee morale.

Creating a work environment where every employee feels valued for their contributions to the company and recognizes that there is an expectation that they will actively participate in their recovery from an injury or illness and return to productivity as soon as possible, has a two-fold purpose: to lower the cost of risk by reducing the cost of insurance, and to protect the profitability of the company by obtaining and retaining the ideal workforce.