The impact of a work-related injury is immediate. The injured employee’s work ceases as they are examined by a medical professional, worker’s compensation paperwork begins to be filled out and filed, and the employee is sent home to recover. This scenario and the associated costs are fairly standard for most facility managers and supervisors. But this is also only a partial view into the true, full cost of that injury for an organization.
Understanding the downstream costs of a work-related injury prepares organizations for the full gravity of the situation and highlights the importance of proper safety procedures to avoid injuries where possible.
Direct vs Indirect Costs
What was described above — the medical and worker’s compensation costs — are considered the Direct Costs of the employee injury. These are costs that can be definitively ruled as being a direct result of the incident. These are also the costs handled by the company’s insurance agency.
The total direct costs for an incident range depending on the type of injury, where it happened, and which part of the body was affected, but the average direct costs for an injury per data from the National Council on Compensation Insurance’s (NCCI) Workers Compensation Statistical Plan database is $41,003.
Indirect Costs include all the costs outside of the immediate injury. Both the amount of categories and dollars for indirect costs greatly outweigh the average direct costs for a workplace injury. General indirect costs from workplace related injuries include:
- Production Costs – Reductions in quality and production from stopped work, assessing and replacing potentially damaged equipment, overtime pay to meet continued production demands, etc.
- Fines and Enforcement Costs – OSHA fines and penalties if the incident is found to be caused by negligence, administrative time, and attorney fees.
- Human Resource Costs – Personnel (HR, supervisors, and managers) required to commit time to completing necessary documentation; incident investigation reporting; hiring additional legal counsel, third-party safety consultants, and additional medical advisors.
- Cultural Costs – Overall employee morale will decrease, in addition to recovery time and psychological care needed if the injury results in a death. Negative company reputation can also be created from a perceived lack of quality and safety oversight.
These by no means encompass all of the potential indirect costs incurred by an onsite injury. But the breadth of indirect cost can illustrate just how much a single injury can end up costing an organization. The exact amount of indirect costs per injury varies greatly depending on several factors, which is why OSHA has created an online worksheet — $afety Pays — to help organizations get a glimpse of the full economic impact with direct and indirect costs.
Work-Related Injuries Cost Example
For instance, let’s assume an employee receives a fracture on the job. Using the $afety Pay tool’s average cost for a fracture, the tool’s indirect cost ratio of 1.1 for most injuries, and using an average profit margin of 10%, the cost of that single fracture breaks down as:
- Direct Cost = $54,856
- Indirect Cost = $60,341 (Direct Cost x 1.1)
- Total Cost = $115,197 (Direct Cost + Indirect Cost)
- Total Sales to Compensate for Total Injury Cost: ~$3.8 Million
Avoiding and Reducing Work-Related Injuries
Completely avoiding injuries on the job is a difficult goal to accomplish. But the cost of the alternative is a hard pill to swallow for most businesses.
Creating and maintain a safety culture within an organization helps jump-start an organization’s safety program and work toward the goal of reduced injuries in a holistic and actionable way. By focusing on building a culture of safety, an organization is able to utilize the assets it already has — its employees — to identify and continually improve safety issues around the organization. Committing resources to creating and maintaining a healthy culture of safety through education and leadership initiatives will drive employees to adopt safer working habits, improving efficiency and dramatically reducing the potential for future safety issues.
Optimum Safety Management provides the information and services to help companies develop safety leaders and improve overall safety performance. For more information on how Optimum Safety Management can assist with your businesses’ safety needs, contact an expert today, or reach out via phone at 630-759-9908.