Study: Lump Sum Settlements Encourage Return to Work

Lump sum settlements in workers’ compensation claims encourage injured workers to return to work, according to a new study by the Workers Compensation Research Institute’s (WCRI).

The study, Return to Work after a Lump-Sum Settlement, looked at whether lump sum settlements help or hurt return to work for injured workers. Although some believe that settlements discourage return to work, the study shows the opposite is true.

“This is an important study because we need to find out whether settlements discourage return to work for injured workers who want to return to work or assist them in closing this chapter of their life and moving on with their career,” says Bogdan Savych, author and public policy analyst at WCRI. “My hope is this research will help policymakers and other stakeholders understand how workers respond to receiving a lump sum settlement.”

The study examines the experience of 2,138 workers who were injured in Michigan in 2004 and later received a lump-sum settlement. WCRI followed the employment experience of these workers between 2004 and 2008.

Although the study focuses on injured workers in Michigan, policymakers from across the country can learn from these findings and better understand a worker’s decision to return to work after a lump-sum settlement.

Among the study’s many findings are:

• 78 percent of the injured workers in the study who received a lump-sum settlement didn’t change their employment status, which means that many of those who were employed at the time of the lump sum stayed employed and those who were not employed remained unemployed.
• Of those injured workers that did change their employment status, nearly 30 percent who were employed at the time of the lump-sump settlement left work and nearly 19 percent of those who were not employed at the time of the lump sum attained employment.
• On average, more injured workers returned to work after receiving a lump-sum settlement than exited. Average employment in the sample increased from 25 percent of workers at the time of the lump sum to 32 percent of workers 1 year after a settlement. The exception is older workers who experienced a decline in employment after a settlement.

Source: WCRI