HR Calculations Workers’ Compensation Cost per Employee
Even though your total claims are going down, doesn’t mean your costs are following suit.
Certain types of injury—such as those serious cases requiring hospital treatment or surgery,
or those resulting in long term disability—can be extremely expensive to the organization.
The effectiveness of your prevention programs cannot be evaluated on reduction in claims
overall. However, the cost is not necessarily representative of the success or failure of the
program either—one serious injury can skew the results. To fully evaluate the impact of
workplace injury and illness, employers should review a variety of related metrics.
Calculating the Average Cost Per Employee:
1. Obtain the total costs of active claims for the year. This information should be
available from your workers’ compensation carrier.
2. Obtain the total number of workers’ compensation eligible FTEs (full time
equivalents) on the books.
3. Divide the costs by the number of employees to get the cost per FTE. For
example, if your total costs were $50,000 for the year, and your company has 25 full
time equivalents on the books, the total cost per FTE is $2,000.
Things to Consider:
• Calculate only the costs of active claims by dividing the total costs of active claims
by the number of active claims. For example, if the total costs were $50,000, but the
number of active claims was 10, the total cost of each active claim averages $5,000
(versus an average $2,000 per FTE in our earlier example).
• Calculate the costs of closed claims/settlements by dividing the total costs of
closed claims and settlements by the number of closed claims.
• Consider segregating the costs of actual medical treatment, as opposed to total
costs including indemnity, or settlements for future medical or nuisance value, so
that you can identify the average cost of medical treatment per claim.
Labor LawCenter samples are designed to help your company comply with your employment law needs. Please note that general legal
information is not the same as legal advice—the application of law to the company’s specific circumstances. Although we go to great lengths
to make sure our information and samples are accurate, they are for informational and instructive purposes only and may not be suited to
every situation. LaborLawCenter recommends you consult a lawyer for legal advice tailored to your company’s specific situation.
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