BizHealthCheck: Smart Savings: Return-to-Work Programs Yield Big Returns

Nov. 19, 2002
Fiscal-savvy companies use transitional duty to manage workers' compensation costs.

The economy doesn't care if you're a Fortune 500 company or a mom-and-pop operation when it starts going south as it has over the past year, it causes belts to tighten in organizations everywhere. The sagging profits have prodded management teams around the world toward one common strategy: How to protect eroding assets and safeguard their bottom line.

One line item that takes a big bite out of budgets is the rising cost of workers' health maintenance and care it is estimated that businesses around the globe have shelled out nearly one trillion dollars annually to this effect. But there is a remedy that can result in smart savings during these troubled financial times: Implementing transitional duty as a tool to manage workers' compensation and disability costs.

Return to work strategy

Transitional duty allows workers who are unable to perform their normal job duties because of injury or illness to return to work in modified-duty capacity. By allowing workers to return in a temporarily diminished role, companies can:

  • Maintain an experienced work force;
  • Maintain production, workflow and quality standards;
  • Stabilize wage and production expenses;
  • Improve compliance with state and federal employment regulations;
  • Improve morale and self esteem; and
  • Accelerate/improve recovery.

What's more, transitional duty can help decrease insurance overhead, hiring and job-training costs, use of nonessential medical treatments, injury rates, frequency of lost-time claims, litigation costs, and fraud and abuse.

Here's a sample scenario: A worker is injured and can't perform his normal job. The job can't be untended it must be filled by another worker. The cost of a replacement worker, though, is "sunk cost" and will be paid with or without transitional duty. How to handle costs associated with the injured worker and use of transitional duty to keep up both company productivity and that of the individual lends some intriguing and cost-effective options (see Figure 1 below). One option employers can choose would be to bring the employee back to work on transitional duty at full pay. Another option is to leave the employee out on workers' compensation at the state-specific wage reimbursement percentage (which ranges between 60 percenet and70 percent of the average weekly wage).

Figure 1

Costs Associated with Disabled Workers & Transitional Duty

Option 1: Bring back employee on transitional duty at full pay 100% Daily Cost = $100*

Option 2: Leave employee on workers' compensation Average 70% Daily Cost = -$70*

Cost of bringing back the employee = $30*

(*Figures are sample numbers to convey the concept and are not meant to represent actual costs.)

So, in this example, the cost of returning the employee to work will be only an additional $30 per day and the question becomes: Will the employer get $30 worth of production a day for the employee on transitional duty? Most likely, yes. Can you hire and train a replacement worker for $30 a day or less? Almost positively, no.

Crunching the Numbers

This math isn't fuzzy a 1998 report by Business Insurance showed that employers who use transitional duty as part of their workers' compensation networks save between 10 to 40 percent on workers' compensation medical costs and between 14 to 25 percent on wage replacement or disability income replacement costs. Business Insurance also estimates that lost-time claims average out at approximately $19,000 in combined medical and indemnity costs per claim.

For a closer look at the return that can be yielded by using transitional duty, let's look at XYZ Health Care System. John, a worker at XYZ, dropped a warming tray on his thumb while washing dishes and sustained a traumatic ligament injury. John was treated and cleared by his doctor for return to work with restrictions. Unfortunately, no modified duty was available so temporary disability benefits commenced. After eight weeks, the treating physician would not release John to full duty and XYZ still did not make transitional duty available. Finally, five months after the initial injury, John was returned to full duty.

Here's how the numbers crunch: XYZ paid John a weekly workers' compensation rate (70% of base weekly salary) of $288.66 for the 20 weeks he was out of work, for a total of $5,773.20. XYZ also paid the cost of the replacement worker's full salary of $7,504.80 for the 20 weeks John was gone. So out of the $13,278 total that was paid out in salary and compensation, only half of it was tied into actual production.

Had XYZ incorporated a return-to-work policy using transitional duty, they would have paid out only $329.89 for the eight days of work he missed while recovering from thumb surgery, and gained physical productivity on the part of both the injured worker and the replacement worker for every dollar spent.

The Loss Factor

On top of the $13,278 XYZ paid in salary to the replacement worker and compensation to the injured worker, XYZ's insurance premium took a hit because of the loss experience factor. The slower the return to work by an injured worker, the more the loss experience dollars add up, resulting in a higher experience modification factor. This factor influences an employer's standard premium upon which workers' compensation rating plans are based. Without having a transitional duty program in place, XYZ's loss experience costs increased, which resulted in higher premium payments

Getting injured employees back to work whether on transitional or full duty is directly tied into insurance premiums, a line item that has a huge impact on financial bottom lines. Payroll and losses are reported to the rating bureaus that control the rates and calculate the experience modification factor on which premiums are based. The lower the days lost by an injured employee, the lower the loss experience, which in turn influences the premium.

Interestingly, a 1997 American College of Occupational and Environmental Medicine-sponsored survey of occupational health physicians showed that most felt that only 5 to 10 percent of injured workers actually need more than a couple of days off of work. However, statistics from a 1998 National Council of Compensation Insurers survey show that 24 percent of workers are out more than a couple of days after an injury. This means 60 to 80 percent of lost-time claims involve medically unnecessary time off from work, which directly impacts your bottom line.

Bringing the Worker Back

Remember, only the evaluating doctor can make the call to return a worker to light or full duty. In addition, your health program coordinator should evaluate these three factors for early return to work or transitional duty: individual risk, job risk and combined risk.

Individual risk factors to consider are:

  • Age (risk increases with age)
  • Gender (risk is slightly higher in females)
  • Psychosocial: Personality traits; depression; coping ability; overall poor health; lower socioeconomic status; lower intelligence; and job dissatisfaction.

Job risk factors to consider are:

  • Job or task demands: Frequent/prolonged repetitive movements, awkward postures, cold temperatures
  • Organizational structure
  • Physical work environment including equipment design and work station design.

Combined risk factors to consider are:

  • Age/Gender
  • Genetics and present overall health
  • Workplace - Monotonous/repetitive work; long hours; stress
  • Environment outside of work
  • Biosocial issues - Attorney involvement; delayed intervention; no return-to-work program in place.

Return-to-work programs that involve transitional duty have been widely used by employees, who appreciate the sense that their presence is valued by the company and that they won't be entirely replaced. In fact, the likelihood of continued employment may double when there is a return-to-work program in place. Workers know they'll be taken care of and receive not only quality, timely medical care but a full paycheck as well while on transitional duty. In addition, management is able to progressively return the employee to work and keep operations running smoothly.

Better yet for both parties is the inadvertent promotion that transitional duty provides for immediate notices of loss, a critical factor in keeping costs down. A 1997 survey by Johnson & Higgins reveals that the average cost of a claim increases 1 to 3 percent for every day the reporting is delayed from the date of injury. By using techniques that focus on return to work, such as transitional duty, workers' compensation indemnity payments may be reduced by 18.5 percent.

Forming Your Own Program

In order to form your own transitional duty program it is critical that all key players senior management, managers and supervisors, program coordinators, insurance company, employees, and medical provider are on board and fully support the program. (For tips on how to address common barriers to successful implementation of a transitional duty program to key individuals, see Figure 2 at the end of this article.) Next, be able to quantify and show the extent of the problem at your company. In order to accomplish this, you must be able to identify the cost of occupational and non-occupational disabilities, medical, indemnity and other hidden costs.

Once you've successfully pitched the underlying philosophy of transitional duty keeping employees satisfied and healthy while saving the company money you'll need to formalize a written transitional duty program that identifies and defines opportunities for transitional duty jobs. It is important that job descriptions for both regular and transitional duty positions be developed and maintained to aid in this process. You may also want to consider setting parameters for your program, including time on transitional duty or the number of employees on transitional duty.

One of the key components to the success of this program is, of course, education and training of the employee. Beyond fostering positive feelings about transitional duty, it is important to communicate employee responsibilities, i.e., immediate reporting of illness or injury, proper procedures that need to be followed, compliance with the treating medical provider's recommendations for return to work, communication of those restrictions to necessary supervisors, and sticking to prescribed treatment and exercise routines.

By working together, workers' compensation costs can be kept down while morale and profits increase. To us, that's a smart-savings strategy.

Figure 2: Addressing Common Barriers to Transitional Duty Programs

"We don't have any modified-duty jobs."

One can:

  • Modify the job to meet the restriction;
  • Look at the tasks of the job to determine which tasks can or cannot be performed;
  • Look at other areas within the facility where help may be needed and at the same time keep the employee within his/her restrictions, i.e. filing, greeting customers, answering phones, etc.

"What if an employee's condition gets worse by coming back early?"

Studies suggest the longer an employee remains at home, the less likely he/she will return to work. Motivation can become an issue and "psychiatric overlay" can become an issue. The benefits to returning the employee to work early can far outweigh the risk of re-injury.

"I have a lot of work to be done…I need everyone to be able bodied."

There is a cost to absenteeism with or without a transitional duty program. If you need a certain number of able bodies to work, you need them with or without transitional duty, so the hiring of a temporary is a "sunk cost." By allowing the employee to return to work in a transitional duty capacity, you are benefiting from that person's ability to provide some productivity rather than none.

"The budget doesn't allow for 'extra' employees."

Your employee is not "extra." He is your employee. A technique one can use to overcome this barrier initially is to create a transitional duty cost center. By shifting the employee's salary to a transitional duty cost center, and having the employee perform some functions of his/her job, the department is receiving productivity with no effect on the budget.

"Modified duty is bad for morale or encourages favoritism."

There is no favoritism. Modified duty should be offered to everyone who is disabled and has restrictions placed on his/her ability to perform all essential functions of the job. If the program is introduced in a positive light, and if management supports this positive culture, the morale should change. Cultural change takes time, but it does occur with management support and commitment.

"The program is too time consuming to administer."

Do the cost/benefit analysis comparing the time it takes to administer vs. the savings realized by having this program in place. Designate someone to be the program coordinator to streamline the process. Outline that person's responsibilities to administer the program, and gain everyone's support to keep the administration simple.

"I can't have everyone on permanent light-duty assignments."

Consider placing a time limitation on your transitional duty program, perhaps 60 or 90 days. Remember, transitional duty is a temporary modification of someone's job to meet restrictions. If the restrictions haven't been lifted after 90 days, there is a possibility the restrictions are becoming permanent. If this is the case, this now may be an ADA issue, and a decision has to be made whether to provide a reasonable accommodation for the permanent restrictions. Your transitional policy must be clear that the program ends once the restrictions are deemed permanent.

"The program costs too much."

A comprehensive cost/benefit analysis of the direct and indirect costs of employee absenteeism should reveal the benefit in returning employees to work on transitional duty. Ask yourself: How will the work get done? Will it require payment of overtime or hiring of additional temporary staff? Consider the morale of the workers who are picking up additional duties for the employee who is absent. Consider the insurance costs for the payment of disability benefits. These are all quantifiable, and will support the benefit of transitional duty implementation.

"The union will never agree to this."

When the benefits of the program are properly presented to the union, most will agree to it. If the employee is receiving his/her whole salary while working in a transitional duty capacity, both the employee and the union benefit from the program. If presented to employees in a positive light, it could boost morale.

Livia Pontani Bailey, RN, MA,COHN-S, ARM, is a member of the American Association of Occupational Health Nurses Inc. (AAOHN) and presented the concept of transitional duty along with her co-author, Marita Tortorelli, BA, AIC, at AAOHN's annual meeting, the American Occupational Health Conference. Bailey is a Risk Control Supervisor and Tortorelli is a Claims Service Manager at The PMA Insurance Group, a property and casualty insurance group specializing in workers' compensation and group disability insurance and related services.

BizHealthCheck is a monthly online column produced for by the American Association of Occupational Health Nurses (AAOHN) In its 60th year, the American Association of Occupational Health Nurses is a 12,000-member professional association dedicated to advancing the health, safety, and productivity of domestic and global workforces by providing education, research, public policy and practice resources for occupational and environmental health nurses. These nurses are the largest group of health care providers serving the worksite. For more information, visit

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