Have you ever considered the total costs of a workplace accident, especially one that involves an injury? You may have considered some of the direct costs including; insurance costs and costs of medical treatment. Studies have shown that the indirect costs of an accident can be anywhere from 2-5 times or more the direct cost of an accident. What are the indirect costs of an accident?
Some of the indirect accident costs include: 1) down time while there is an initial response to an accident; 2) continued down time due to any related equipment damage; 3) counseling for affected employees; 4) training costs to replace the injured employee; 5) time related to investigating the accident and working with outside agencies; 6) costs of an OSHA inspection including penalties if the accident triggered an inspection and 7) costs relating to the correction of conditions that led to the accident.
OSHA has an accident cost estimator on its website. It can be accessed at this link: https://www.osha.gov/dcsp/smallbusiness/safetypays/estimator.html This tool walks you through an accident with injuries resulting in lost work time to arrive at a sales amount needed to pay for all of the accident costs. The accident classifications are very general and average costs are used. For example, the program estimates the direct cost of a “strain” to be $32,319. Keep in mind that the strain is significant enough to result in lost work time. They estimate the indirect costs to be just over the same as the direct costs so they arrive at a total cost of $67,689. Based on a company having a 3% profit margin, the estimated sales needed to pay for this accident is $2,262,300. You can enter an actual cost into the program instead of using their estimated average injury cost.
If you haven’t considered all of the costs of an accident, perhaps only figuring on what you pay in workers compensation premiums, this can be sobering information. The good news is that there are ways to control these costs. The obvious one is a solid accident prevention program where employees are well-trained, supervisors promote safety and management buys into it. Another one is an effective return to work program. This can help reduce the time an employee is away from work, helping reduce both direct and indirect costs. Be sure to work with your workers compensation carrier to come up with an effective plan.
Accidents cost much more than you may have thought. Review your accident prevention program. Are employees engaged in safety? Do you expect supervisors to promote safety and take steps to discipline when needed? Is your safety leadership role as important to you as your other leadership roles?
What do you think about the relationship between direct and indirect accident costs? Have you experienced other indirect accident costs? What has been your experience with return to work programs?
Rich Galutia CSP specializes in the areas of employee safety (OSHA), trucking compliance (FMCSA) and animal feed safety (FDA).