What is the cost that employers incur for occupation-related injuries and illnesses?  In all probability, it is much, much more than employers may imagine.   Aside from the human suffering that is associated with injuries and illnesses, the financial impact may be as distressful to a company as is the temporary or permanent loss of a valued employee.   

Despite the fact that workplace injuries fell 1.5% in 2017, the costs continue to rise according to the latest Liberty Mutual Insurance Company index.   Medical and lost-wages amounted to a 2.9% increase overall and the true cost of injuries that caused employees to be absent from work six days or longer was $58.5 billion or more than a billion dollars per week for affected companies. 

The costs related to an employee injury or illness customarily are broken down into two categories, direct and indirect or hidden.   Direct costs tend to be relied on by insureds as the total costs to a company in the wake of an accident but frequently they do not realize or understand that direct costs are just the “tip of the iceberg”.

Indirect costs may be far greater than direct costs (some research estimates that indirect costs may be as much as ten times higher) and together they comprise the “real-world” cost of injuries and illnesses.      According to the National Safety Council (NSC), for every dollar in direct costs, indirect costs could be as much as $2.12.

Below is a breakdown for each of these categories:

Direct:

  • Medical costs, which may include hospitalization
  • Recovery and rehabilitation expenses
  • Workers’ compensation payments
  • Increased workers’ compensation premiums
  • Possible loss of insurability
  • Attorney’s fees

Indirect:

  • Disruption of work flow and efficiency
  • Costs to replace or repair equipment, vehicles, or facilities damaged due to the accident
  • Time lost to replace or repair equipment, vehicles, or facilities damaged in the accident
  • Training a replacement worker
  • Order backlog due to work slowdown or stoppage
  • Administrative and secretarial time to process accident report and OSHA visit if applicable
  • OSHA penalties and fines
  • Full or partial wage payments for the injured workers
  • Loss of prestige or damage to company image because of adverse publicity

Clearly, for all businesses subject to OSHA regulations, the “bottom line” is that occupational accidents and illnesses have significant and often unforeseen financial ramifications for employers separate and apart from the pain and suffering endured by the affected employees and their families.  Not only is providing a safe and healthful work place ”the law”, it has benefits that may not be apparent or understood by many employers.  The best defense against these expensive losses is an integrated and active safety culture that never loses sight of the fact that employees are the company’s most valuable assets.

Please direct any questions or concerns to:

The Safety Division at Hamond Safety Management

Anthony Vacchio,   avacchio@hamondgroup.com   516-762-4224