Here’s one consequence of a reduction-in-force that may not come to mind right away — and it’s a big one.
Healthcare and workers’ comp costs tend to increase as a company’s headcount decreases.
That’s the conclusion of a new study of one Fortune 500 company’s downsizing efforts, conducted by employee benefit and risk management technology provider Options & Choices, Inc. (OCI).
OCI’s argument: Healthcare and comp claims increase when employees are — or fear that they could be — downsized.
And there are several reasons OCI says this happens, including:
- Employees who are left picking up the slack during workforce reductions sustain more serious injuries
- Workers who are afraid they’ll be affected by a reduction in force see workers’ comp as a way to continue to get paid
- Employees who’ve accumulated physical stress or have a medical condition may file claims thinking they could miss their chance to file if they lose their jobs, and
- People afraid they’ll be terminated may encourage their family members to attend to their medical issues before they lose their healthcare coverage.
OCI analyzed the unnamed company’s short-term disability, long-term disability, workers’ comp, health insurance and prescription drug costs over a 32-month period, which spanned its 10% reduction in force.
Result: In the 14 months after the company downsized, its benefits expenses increased by $11.1 million.
Do you think this is a one-time instance, or could you see this happening at other companies — including yours? Share your thoughts in the Comments Box below.