Committed management: Making the case for best practice RTW

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Committed management: Making the case for best practice RTW

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The first step in developing a best practice work disability program is to get commitment from the leaders of the organisation. This may include senior management, leaders from the 'factory floor' and production and HR management.

Getting senior, finance and risk management on side: The financial case

When making the case for best practice RTW systems to senior management the financial argument is often the most compelling. It is important to highlight both the direct and indirect cost savings that can be achieved through implementing comprehensive RTW programs.

tog_minusDirect cost savings

Direct costs are those immediately associated with workplace injuries and illnesses. Implementing effective RTW programs can significantly reduce these costs:

•Workers' compensation premiums — improved RTW rates and reduced claim durations lead to lower premiums over time.

•Medical expenses — early intervention and proper care can prevent complications and reduce overall medical costs.

•Wage replacement — faster RTW means fewer days of wage replacement payments.

•Legal costs — effective programs can reduce disputes and associated legal expenses.

•Administrative costs — streamlined processes can decrease the time and resources spent on claim management.
tog_minusIndirect cost savings

Indirect costs, while less obvious, can have a substantial impact on an organisation's bottom line. These costs are often several times higher than direct costs:

•Productivity losses — reduced when injured workers return to work more quickly.

•Overtime expenses — reduced need for other employees to work extra hours to cover absent workers.

•Temporary worker costs — less reliance on temporary staff to fill gaps.

•Training costs —decreased expenses for training replacement workers.

•Reduced turnover — effective RTW programs can improve employee retention, reducing recruitment and onboarding costs.

•Improved morale — better RTW outcomes can boost overall workplace morale, potentially increasing productivity across the organisation.

•Enhanced corporate image — a reputation for taking care of employees can attract top talent and improve customer perceptions of the organisation.

 

prod_tip Research has identified two equations that can be used to get a reasonable estimate of indirect costs:
 
Indirect costs = Direct costs x 4
 
Daily indirect costs = absent employee’s daily salary x 2*
tog_minusPresenting the financial case

By presenting a comprehensive financial case that addresses both direct and indirect costs, you can make a compelling argument about the value of investing in best-practice RTW systems. Tailor your presentation to your specific organisation's context and financial priorities.

When presenting to senior management, consider these approaches:

•Use concrete numbers —provide specific examples of cost savings achieved by similar organisations or from pilot programs in your own company.

•Highlight the multiplier effect — emphasise that indirect costs can be 4 to 14 times higher than direct costs, amplifying the potential savings.

•Long-term projections — show how investments in RTW programs can lead to cumulative savings over several years.

•Benchmark comparisons — compare your organisation's current costs with industry benchmarks to illustrate the potential for improvement.

•Case studies — share success stories from other companies that have implemented similar programs.

•Risk analysis — demonstrate how effective RTW programs can mitigate financial risks associated with long-term disability claims and legal issues.
 

How cost allocation affects RTW outcomes

Costs allocated to a central budget

Costs allocated to relevant cost centre

 

A government health organisation's premiums are paid through the 'head office' or department budget.

 
 

The cost impact of any claim is paid for by head office.

An employee returning to work on modified duties who is 50% productive receives normal wages for hours worked.  This is paid by the workplace.

The workplace is under pressure with staffing levels and budgets.  Budget-wise, it is more sensible if the supervisor encourages the injured employee to remain off work and employs an able-bodied person in their place.

 
The regional area of a government health organisation allocates all costs to the workplace where the injury occurred.
 
 

The cost impact of any claim is paid by the workplace.

An employee returning to work is paid for by the site.  An employee on modified duties who is 50% productive receives normal wages for the hours worked, paid for by the workplace.

If the employee remains off work the costs of the WorkCover premium, which is often higher than normal wages, is paid for by the workplace.  The workplace has an incentive to do whatever is needed to return the employee to the workplace.  

 

Committed Management

Making other cases to management

When arguing for best practice RTW systems that incorporate a holistic approach to worker health, there are several other 'cases' that should be put to management:

The ethical case

Organisations have an obligation to support staff with an injury, including addressing all aspects of their wellbeing.

 

tipbulb Care minimises cost

The corporate image case

Implementing comprehensive RTW programs that care for mental and emotional well-being can improve an organisation's standing with both employees and the wider community.

The legal case

Many jurisdictions now require employers to consider all workplace hazards and risks, including those affecting mental health. Implementing comprehensive screening and interventions can help meet these obligations.

 

flag_green   Many organisations don't spend the time it takes to engage senior managers in the organisation's return to work systems.    
 
Making the case to the senior management team can be one of the most cost effective ways of improving an organisation's systems.

 
The health and wellbeing case

Addressing all aspects of worker health can lead to better overall outcomes for employees, not just those concerning work injuries.