True costs of disability make clear case for return-to-work

New audit tool helps organizations get clear picture of costs

The National Institute of Disability Management and Research estimates typical disability costs for an organization with 1,000 employees to be in the range of $2 million per year. But, with effective and comprehensive disability management and return-to-work programs, it says those costs can be cut by between 30 and 50 per cent.

Yet many organizations remain frustrated by disability management and return-to-work programs, and struggle to see the value of investing in those programs.

The institute has been a major force behind the creation of disability management program audit tool that allows organizations to measure disability management program performance and thereby maximize return on investment in disability management.

Two of the NIDMAR auditors talked with Canadian HR Reporter about the challenges of determining the return on investment in disability management and return to work.

One of the reasons employers and decision-makers get frustrated by disability management and return-to-work programs is that they don’t have a complete picture of the costs of not investing in return to work.

It just makes good business sense to have a healthy and safe work environment with good return-to-work programs in place, says Nicola MacNaughton, president of Moncton N.B.-based Occupational Concepts.

Without it, organizations often end up with increased workers’ compensation rates and run the risk of a surcharge. Additional money into workers’ compensation is, in effect, a subsidy to competitors who have a better workplace safety rate and therefore get lower rates, she says. “Every dollar that goes out for workers’ compensation, that is right off your profit line.”

Liz Scott, a principal with Burlington Ont.-based Organizational Solutions, says there aren’t a lot of organizations that know how to figure out the return on investment of return-to-work or disability management programs.
It does require some careful measuring and the right people have to be involved — finance, payroll and HR — but it can be done, she says. “We do it all the time.”

It’s a matter of taking a baseline measurement of all the costs — direct and indirect — before the plan is in place and then comparing the same costs afterwards. There are the direct costs for workers’ compensation, short- and long-term disability, but it’s also important to put a cost on the more qualitative impacts on the workplace when someone is off sick or injured, she says.

Capturing the value of lost productivity when a replacement worker is on the job is essential. It often reveals how important it is to get someone back on the job as soon as possible.

“If you can produce 100 widgets an hour, but with the replacement worker you can only produce 80 widgets, those are the kinds of numbers that make the production manager go ‘ouch,’” she says.

The cost of lost time for a knowledge worker can be even greater because often it is impossible to replace someone.
In many organizations there are costs that go unrecognized, says MacNaughton. “It’s the iceberg theory,” she says. “For every dollar in actual costs, there can be another $5 to $35 of unforeseen costs that you are not seeing.”

Once an organization sees all the costs of disability, the next step is putting in a successful program.

First and foremost the most important element of an effective return-to-work program is early intervention, she says.
If you look at the research and literature the longer someone is out of work then there more difficult it is to bring them back.

From day one, someone from the organization has to be in touch with the employee to talk with the employee, see how he is feeling and what he is capable of doing.

“Even if they can only do an ounce of work, if it is meaningful and productive, why would you pay for them to sit at home?”
The key word is “meaningful,” agrees Scott. “The objective of modified work is not to have a modified work ghetto,” she says.

This is a common complaint for organizations that have struggled with return to work in the past, she says. In those organizations, the frustration over return to work is all the greater because, by all appearances, headcount is going up with no real return to the organization. People are in the office or at the plant but not doing anything meaningful.

Conversely, in some cases, the problem is that nobody is willing to admit that the returning employee can’t go back to his old job. “What happens often is the worker, or the employer, doesn’t know when to call it a day,” she says. “At some point you have to say, ‘We tried, let’s look at some retraining. Let’s take a look at what else you can do.’”

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