Wage replacement > Focus on outcomes: Wage replacement as RTW incentive

Wage replacements should foster return to work and not act as a disincentive. If wage replacements are to act as a return to work incentive, the levels must be right:

When wage replacement levels are too low

The employer has less reason to be proactive in return to work management and the employee can be financially stressed at a difficult time.

When wage replacement levels are too high

Employees are less focused on return to work.

Employees made aware of expected wage reductions are more likely to be proactive in getting back to work.

When employees are not attending work, transport costs, costs of meals, and any laundering expenses are reduced. In this scenario wage replacements of 90% may actually result in a higher 'net' pay, a disincentive to employee efforts in return to work.

Some insurance systems or union arranged award agreements 'top up' compensation payments so the person is receiving 100% of their wages. This can be a disincentive to return to work.

Many systems reduce the level of wages with time. More important than the level of reduction in wages is informing employees about the changes that will take place over time. If an employee is unable to return to work then forward planning to cope with less income will reduce the stress associated with unresolved financial issues.

Striking a balance is not easy, and what may be appropriate for one person won't necessarily be so for others. It can be helpful to keep in mind that the focus of wage replacement should always be on supporting employees to return to work.