How Employee Disengagement Affects Workers’ Compensation Costs

employee disengagement

One of the greatest challenges facing modern businesses is employee disengagement. According to a 2022 Gallup report, employees who are disengaged cost businesses $7.8 trillion globally. These lost productivity costs equated to approximately 11% of the global gross domestic product (GDP). Regardless of which industry your organization operates in, employee disengagement costs pose a serious threat to business continuity.

Unfortunately, the aforementioned lost productivity statistic only accounts for a portion of the total cost of employee disengagement. In addition to harming the productivity of team members, employee disengagement can also lead to a rise in workers’ compensation costs.

Staff members who are not engaged or who are actively disengaged are more likely to suffer work-related injuries. In turn, this can lead to an increase in workers’ compensation claims. Ultimately, a higher claims frequency will cause your workers’ compensation insurance rates to rise.

The cumulative costs of rising workers’ comp insurance premiums and lost revenue due to decreased productivity can seriously undermine business growth. Additionally, employee disengagement can negatively impact the customer experience, cause frustration among good employees, and compound existing staffing issues.

Fortunately, you can take a proactive approach to address employee disengagement costs. However, you must first understand how this phenomenon influences injury rates and workers’ comp claim frequency. Only then will you be able to identify potential causes of disengagement within the workplace and implement remedies to eliminate those causal or contributing factors.

What Constitutes Employee Disengagement?

Employee engagement should not be confused with satisfaction or happiness. While the latter two attributes are important factors to consider when assessing the state of the workplace, engagement is more critical.

Employees who are merely satisfied with their jobs might show up consistently, clock in, go through the motions, and leave as soon as their shift ends. However, they might care little about how the quality of their work impacts the organization and its ability to achieve its goals. Therein lies the difference between satisfaction and engagement.

Engaged employees have an emotional and psychological commitment to the brand, its goals, and its mission. Conversely, disengaged employees experience a decreased level of commitment, if any at all.

Disengaged employees are typically described as either “not engaged” or “actively disengaged.” Employees who are not engaged are simply going through the motions. They may have some negative sentiments toward the business but are more likely to exhibit indifference.

On the other hand, actively disengaged employees can best be described as checked out and disillusioned. They have negative feelings toward the brand, or at the very least, members of the management team.

Employers should be wary of both types of disengagement. While actively disengaged employees pose the biggest risk to businesses, any disengaged employee is at an increased risk of workplace injury compared to engaged team members.

Cumulatively, disengaged employees experience 64% more accidents than their engaged counterparts, according to Gallup. Researchers also found that employers with a significant number of disengaged staff members experienced greater rates of absenteeism and theft. Businesses operating in the healthcare sector also reported an uptick in patient safety incidents.

What Causes Employee Disengagement?

Before shifting attention to the connection between employee injuries and engagement levels, it is important to outline some of the core causes of disengagement.

While one particular shortcoming might be the most significant factor fueling low engagement levels, most employers find that disengagement is connected to several of the following factors:


Micromanagement is a workplace plague that crushes morale and increases disengagement rates at a rapid pace. Many micromanagers are seen as “helicopter supervisors,” constantly hovering over employees and scrutinizing even the most minute tasks.

While this over-involvement is certainly one of the most prevalent factors of micromanagement, another equally harmful factor is an abundance of criticism without useful feedback and guidance. According to a 2020 Society for Human Resource Management (SHRM) survey, 84% of participants report that “poorly trained managers” are responsible for creating an undue amount of stress and increasing the workload on their staff.

During the survey, SHRM researchers also asked participants what skills they believed their managers lacked. The most commonly cited skills were communication, team development, and time management.

Further, employees who feel as though their every move is being scrutinized will be less productive. These feelings will be exacerbated if employees believe that their managers lack essential leadership skills.

These effects can increase their risk of suffering an injury because they may lose focus at work. Over time, employees may adopt the mentality that they will be criticized regardless of what they do, so why try to excel?

Lack of Recognition

When employees do not receive recognition for a job well done, they may begin to believe the work they do is insignificant to the company. In turn, this can lead to disengagement among otherwise hardworking employees. Over time, employees who receive no recognition may decide to seek employment elsewhere. If they hang around, these workers might be at an increased risk of injury due to their lack of engagement.

Poor Communication

A great manager knows how to mobilize employees through clear, transparent communication. Conversely, a manager with poor communication skills will damage the productivity of the entire team.

Poor communication not only harms performance but can also lead to higher rates of disengagement. Employees want to know the “why” behind the tasks they are assigned. When they know why they are doing something and how it fits into an organization’s overall strategy, they are more likely to exhibit high levels of engagement.

A Polluted Workplace Culture

Top-tier employees will most likely maintain high levels of engagement, even if a few toxic coworkers infiltrate a company. However, the career trajectory of average employees will be significantly influenced by the culture within a business.

If disengaged workers have polluted a workplace culture, the productivity and mindset of average team members will eventually be impacted. These middle-of-the-road employees may become less engaged, especially if the pollution in the workplace is not addressed promptly. If a toxic culture is allowed to fester, even your best workers will feel the effects of this subpar work environment.

What Effect Does Employee Disengagement Have on Work Comp Claims and Costs?

A 2021 meta-analysis of healthcare workers revealed a significant relationship between employee engagement and adverse events. The meta-analysis also demonstrated a strong correlation between engagement levels and safety culture scores. Researchers concluded that higher staff engagement could improve patient safety. They also found that higher engagement levels could enhance safety culture in general.

Although this study focused on the healthcare sector, the results have implications for businesses operating in any industry.

A recent Gallup poll revealed that employee disengagement is on the rise in practically every industry. Researchers found that only 34% of employees were engaged in the workplace, while 14% were actively disengaged. The remaining 52% of respondents fell somewhere between not engaged and partially or somewhat engaged.

Disengagement and Workplace Injuries

According to the Bureau of Labor Statistics (BLS), the healthcare sector had the highest number of injury and illness claims in each of the last three years. The retail trade, manufacturing, transportation, and warehousing industries also had a significant number of workplace illnesses and injuries.

While numerous factors undoubtedly contributed to these high claims figures, disengagement certainly played a role. Disengaged employees are less attentive and more likely to suffer an injury while on the job compared to team members with average or high engagement levels. During a recent comparison of bottom-quartile and top-quartile engagement business units, the former exhibited a 64% higher accident frequency than the latter, according to Gallup.

Naturally, injured workers will file workers’ comp claims. Claims frequency is one of the factors that insurers examine when setting premium rates. Payroll, cost per claim, and severity of workplace accidents are other factors that can influence workers’ comp insurance costs.

Even though the costs associated with these claims are covered by workers’ comp insurance, future premium costs will rise significantly. In some scenarios, businesses may incur added premium costs of $0.50 to $0.80 per dollar of payroll. These rate increases will impact the business for three years, provided that no new incidents occur and their Work Comp MOD rates go down.

Workers’ comp claims pose the biggest threat to self-insured companies, as they must cover smaller claims out of pocket. If a claim gets indemnified, millions of an organization’s capital can be tied up, threatening business continuity.

How Do Mid-Level Managers Impact Employee Engagement?

Mid-level managers have a profound impact on employee engagement. These managers bridge the gap between entry-level employees, frontline supervisors, and the C-suite. Effective managers can shape company culture, bolster employee engagement, and maximize the productivity of their staff. However, ineffective mid-level managers can have the opposite effect, even if executives are committed to optimizing employee engagement rates.

Typically, mid-level managers project their own sentiments about an organization to their subordinates. Engaged mid-level managers are more likely to have a highly engaged team. Conversely, mid-level managers who are frustrated with an organization and their role in it may inadvertently (or intentionally, in some instances) erode employee job satisfaction and engagement.

Frustration among middle managers is more widespread than you might expect. According to Harvard Business Review, middle managers are approximately 46% less satisfied with their careers and responsibilities than senior execs.

Therefore, any efforts to hold managers accountable and enhance employee engagement rates must also focus on improving morale within your middle management team. Generally, this can be accomplished by providing these individuals with the tools, training, and resources they need to effectively manage their respective teams, but more on that below.

What Can Managers Do to Improve Employee Engagement?

Optimizing employee engagement and reining in workers’ compensation costs requires a concerted effort from all organizational leaders. C-suite executives and upper management must leverage proven strategies to improve employee engagement at the front line and among middle managers. This can be accomplished by:

Optimizing Employee Selection Processes

Hiring the right employees is the first step to optimizing engagement and reducing work comp costs. With that in mind, it is time to modernize your screening and selection processes.

The best way to control which candidates make it to the interview process is to implement integrity testing. Integrity tests can reveal which applicants possess undesirable traits, such as a propensity for lying or a willingness to steal from an employer. This data will provide benefits beyond fostering employee engagement.

Companies reported an average workers’ comp loss reduction of 57% after introducing integrity testing.

Investing in Leadership Training

Wages certainly influence the satisfaction and engagement levels of mid-level managers, but these employees also want to be given the resources they need to achieve sustained success within their respective roles.

When companies invest in leadership training for frontline supervisors and middle managers, everyone wins. These training courses serve several purposes.

First and foremost, leadership training equips managerial staff with crucial skills and knowledge, which can improve communication and collaboration across the entire organization.

Additionally, managers who have received adequate training can get more involved in the screening and hiring process. They can have an influence on hiring decisions and play a larger role in shaping the teams they are expected to manage.

Recognizing Top Performers

Providing top performers with well-deserved recognition will go a long way in improving overall engagement. However, you must first implement a process for monitoring and evaluating employee performance. You can do this by investing in a performance management solution.

Such a platform will enable you to generate a custom report for each employee, monitor their performance, and identify ways to improve both individual and department productivity.

Once you have implemented a solution, make sure to recognize top performers frequently. Naming top monthly, quarterly, and annual performers is an effective approach.

Recognition and reward were found to significantly affect employee engagement, according to a 2022 study on the determinants of employee engagement. Researchers also found that work-life balance could have a major impact on engagement levels. In light of those findings, you should consider rewarding leading employees with additional time off of work so that they can “recharge” and be more productive.

Gamifying Engagement

Some tasks and roles that are essential to a company’s success are just not very exciting. However, companies can encourage employees to be more engaged by gamifying otherwise redundant tasks or processes.

For example, suppose that your healthcare organization is experiencing high levels of disengagement among your transcriptionists, who process massive amounts of audio data into typed reports. This task can be tedious, redundant, and boring.

You could gamify this role by tracking each team member’s performance weekly or monthly, then use this data to hold performance-based contests. For instance, you could buy lunch for the employee with the lowest error rate for a certain week, or you could award a gift card to the team member who transcribed the largest volume of records.

Leveraging Training to Create Better Employee Engagement

Refining training and onboarding processes is one of the most practical ways to improve employee engagement. Employers should focus on upskilling managers with better training opportunities while simultaneously onboarding new hires in a way that has them engaged from the moment they set foot in the office.

Training efforts must be centered around teaching middle managers how to identify and select top talent. The training courses should also emphasize how the quality of a hire impacts the engagement of that individual and existing staff.

When working to upskill managers, employers should also invest in hiring and screening resources. A few prime examples include candidate scorecards and personality assessment tests. The former standardizes the process of assessing applicants, while the latter enables managers to determine which candidates will have good chemistry with existing team members.

Training managers to be better at hiring is only part of the equation. It is equally important that businesses provide a great onboarding experience.

What Tools Can Managers Use to Improve Employee Engagement?

Managers can leverage a multitude of different tools to improve employee engagement. Three of the most effective resources at their disposal include:


Employee engagement surveys help managers understand precisely where their company stands in terms of overall engagement. They can periodically administer these surveys to gauge engagement over time. Engagement surveys enable managers to measure the success of their efforts. They are also useful for identifying concerning trends.

Performance Management Tools

Performance management tools will mitigate the costs and annoyances associated with conducting employee evaluations. More importantly, managers can use these technologies to improve the productivity and performance of staff members. These tools can help managers provide employees with timely feedback, encourage them to do better, and keep them engaged with their career journeys.

Personality Assessments

Contrary to popular belief, it is possible to determine whether someone will enjoy a particular role before they are hired. Finding candidates who will love the position they are applying for is easier than ever, thanks to personality and behavioral assessments. These assessments reveal which candidates possess desirable personality traits, such as honesty, integrity, and a good work ethic. Employers can use the findings of these assessments to weed out unqualified individuals and identify top applicants.

New hires who exhibit positive behavioral and personality characteristics will experience higher engagement. They are more likely to love their job and enjoy coming to work each day.

Improving Employee Engagement Is a Journey: Here Is Your Road Map

Improving employee engagement is a marathon, not a sprint. Numerous factors influence engagement levels, and by connection, work comp costs and injury rates. You can systematically address the challenge of employee engagement by following these established steps:

Measure Current Engagement Levels

Measuring current engagement levels will reveal where your organization currently stands. During this leg of the journey, analyze your workers’ comp costs and claims frequency as well.

While there are several ways to measure engagement levels, an employer net promoter score survey is one of the most insightful. It is also cost-effective, which is important because you will be administering it several times as part of this journey.

Share Your Findings

Once you have obtained survey results, share your findings with your entire management team. You should consider sharing the results with frontline staff as well in the spirit of transparency. By doing so, you demonstrate that you are aware of potential engagement issues and inform your team that you are working to resolve them.

Align Leadership from Top to Bottom

After everyone is brought up to speed, it is time to get your leadership team in alignment. Gather feedback from managers at all levels of your organization. Each member of the leadership team should voice their concerns about anything that may be impacting engagement levels and share thoughts on how best to address potential deficiencies.

Take Action

Now it is time to use all of the data you have gathered from your engagement survey and meetings with organizational leaders. This means implementing new training initiatives for managerial staff and reworking onboarding processes. Make sure to invest in new screening resources as well, as these tools will play a valuable role in your push to boost employee engagement.

Reassess and Modify Your Strategy

After your new strategy has had a chance to make an impact on your business, it is time to conduct a subsequent engagement survey. Compare your findings to the results of the initial survey and determine how much progress you made.

Next, gather more feedback from your leadership team. Get their take on what worked and what didn’t produce the desired effect. Use these insights to modify your strategy and move closer to your engagement goals.

Ready to Take Action?

The first step to bolstering employee engagement and proactively reducing the frequency of workplace injuries is to assess the current state of your organization. Once you know precisely where your company stands, you will be able to implement effective cost-control measures, reduce workers’ compensation claims, and protect business continuity.

However, accurately measuring employee disengagement levels requires an expertly crafted assessment tool. Creating such a tool in-house can be cost-prohibitive, time-consuming, and downright tedious.

Fortunately, you can leverage the existing assessment solutions developed by IntegrityFirst. Our experts will create a personalized plan for your business and conduct a comprehensive assessment of current employee engagement levels. You can rely on our services to identify and remedy the root causes of employee disengagement.

Are you ready to optimize employee performance and boost your company’s profitability? Contact IntegrityFirst today.

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