How does the labor shortage impact workers’ comp?

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How does the labor shortage impact workers’ comp?

One result will be an increase in workplace risks for various reasons.

Like many other industries today, the workers’ compensation industry is constantly evolving. As the world continues to adapt and change during the ongoing COVID-19 pandemic, several of the workers’ compensation trends seen over the past two years will continue to play a role throughout 2022.

One notable trend in workers’ compensation is the changing workforce and population demographics contributing to the labor shortage that companies began experiencing in 2021. Baby Boomers have started retiring, and by 2050, the population of people 60 years and older will total 2 billion. Additionally, a record 4.5 million Americans left their jobs in November 2021, leading to a period that is now known as “The Great Resignation.”

What does this labor shortage mean to the workers’ compensation industry? For one, workplace risks are sure to increase for various reasons. Staffing shortages within the insurance industry will also have an impact.

The labor shortage & workers’ compensation

Labor shortages existed even before the pandemic, especially in blue-collar industries. Eighty-five percent of businesses with blue-collar workers reported staffing shortages and recruitment issues as early as 2019. When COVID, hit in the beginning of 2020, furloughs and layoffs quickly followed.

Also, many companies switched to a remote workforce, and employees became quickly accustomed to this new way of life. When offices began reopening, many of these workers had reevaluated their lifestyles and decided against returning to an office building or job site full-time, even if that meant leaving and finding employment elsewhere – sometimes, starting their own ventures.

AmTrust’s Matt Zender, SVP of Workers’ Compensation Strategy, says, “Across the board, frequency has continued to decline over the past few decades. The notable exception to this was 2010, and that frequency increase is generally attributed to the expansion of jobs following the Great Recession. The post-COVID expansion will likely impact frequency in a similar fashion.”

An understaffed workplace means the remaining employees may need to pick up extra shifts, work longer hours and end their days in exhaustion. Or, businesses may find the need to hire untrained employees or temporary workers to fill in the gaps quickly and keep production moving. Both these scenarios can lead to an increase in workers’ compensation claims.

  • Overtired, exhausted workers are more prone to accidents, including vehicle accidents.
  • A higher rate of errors made by undertrained employees.
  • Skipping certain safety protocols due to time constraints.
  • Rushing to fill positions and cutting corners to save time can lead to increased injuries – and mental and emotional distress among employees.
  • Unhappy, disgruntled customers and clients taking their business elsewhere.

Zender states, “We have absolutely seen claims that could have been avoided with better on boarding.”

How can businesses deal with staffing shortages?

As businesses continue to struggle to reach a “new normal” and get back to their pre-pandemic profits and workforce, they may find the need to change some of their tactics to recruit new staff and retain current team members, especially during this unprecedented labor shortage. Providing better training and incorporating technology to reduce some of the challenges they face can help improve overall employee satisfaction.

Business owners can also offer incentives to employees for referring potential new staff members, and provide the same types of enticements to their new hires. Increasing wages, offering bonuses for a job well done, and adjusting schedules and business hours as needed to adapt to employees’ needs can also help recruit and retain employees.

“Employers are working extremely hard to attract talent. While it can be attractive to focus on the ‘bird in hand’ and hire a lesser candidate, the long-term interests of any business will benefit through a more prudent approach,” Zender says. 

Taken from

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