Accidents are more expensive than most people realize because of the hidden costs. Some costs are obvious — for example, Workers’ Compensation claims which cover medical costs and indemnity payments for an injured or ill worker. These are the direct costs of accidents.
But what about the costs to train and compensate a replacement worker, repair damaged property, investigate the accident and implement corrective action, and to maintain insurance coverage? Even less apparent are the costs related to schedule delays, added administrative time, lower morale, increased absenteeism, and poorer customer relations. These are the indirect costs — costs that aren’t so obvious until we take a closer look.
Studies show that the ratio of indirect costs to direct costs varies widely, from a high of 20:1 to a low of 1:1. OSHA’s approach is shown here and says that the lower the direct costs of an accident, the higher the ratio of indirect to direct costs.
| OSHA’s Ratio of Indirect to Direct Costs |
OSHA’s Ratio of I ndirect to Direct Costs |
Source: Business Roundtable, Improving Construction Safety Performance: A Construction Industry Cost Effectiveness Project Report, Report A-3, January, 1982.
The more accidents that occur in a workplace, the higher the costs — both in increased insurance premiums and greater indirect costs.
To help assess the impact of occupational injuries and illnesses on your profitability, try out OSHA’s “$afety Pays” Program. It uses a company’s profit margin, the average cost of an injury or illness, and the indirect cost multiplier to project the number of sales you would need to cover those costs. Also, use a worksheet to help determine the costs of injuries and illnesses and their impact on your business operations.
All this and more can be found on OSHA’s website http://www.osha.gov/SLTC/etools/safetyhealth/mod1_costs.html
