A worker injury comes packaged with costs far beyond worker’s compensation claims and potential litigation expenses. Direct costs are significant; In 2009, worker’s compensation benefits paid totaled $58 billion, a 150% increase from only 6 years prior. Yet, considering direct costs alone when factoring a return on safety investment or justifying safety and health initiatives is painfully incomplete. Companies that have dealt with even minor worker injuries have experienced the hidden costs and indirect bottom line factors that can lead to catastrophic side effects or unanticipated benefits. Studies have shown that work injury prevention programs are effective both on a bureaucratic and a business level. Considering the complete picture of a work injury can be the most effective motivator for investing in safety risk management programs.
Hidden Costs of Work Injuries
The worst case scenario for a work injury, a death or debilitating injury, carries the most hidden costs for a business organization. Large workers’ comp claims hike up premiums and can even lead to inability to change or acquire insurance. From here, consider the effect on the co-worker when an employee suffers an injury on the job. In the worst case, counseling may be required for co-workers, as the work facility becomes a haunting reminder of the incident. Lack of sensitivity to this scenario can lead to worker absenteeism and forge foundational cracks in the management-employee bond. Injuries don’t have to be major to carry hidden costs, however. Companies with a reputation for aloofness to safety, experience a large number of worker injuries, or fail to support national and economic safety initiatives can have a hard time retaining and hiring employee at competitive salary levels.
Indirect Costs of Work Injuries
The indirect costs of a work injury are more easily foreseeable but still difficult to factor in monetary terms. It is important to realize their reach to fully anticipate the event of a work injury, even if the variability of the costs makes them difficult to forecast. Indirect costs can include training and compensating replacement workers, damaged property, production delays, administrative expense, and morale and reputation factors. These side effects and reactionary costs can add up to total up to 20 times the direct costs and are usually considered as a multiple factor in projections.
Indirect Safety Benefit & Opportunity Cost
Remember the hidden costs of a work injury? Hidden benefits are just as closely tied to safety initiatives. Safety programs are beneficial for the business, the worker, and the economy as a whole. A 2001 Liberty Mutual report on Safety Investment ROI shows that 61% of executives see a 3-1 return for safety investments, likely due to improved morale, productivity, industry reputation, community support, and HR advantages. Safety can be a core business value and produce competitive advantage as a positive safety reputation becomes recognized by customers, vendors, and staff. It doesn’t have to be though. An attentive and effective safety program can economically support strategies ranging from quality to customer service, while still producing indirect benefit. Ignoring this agenda for lower return investments is often an opportunity cost for businesses.
When a complete picture of work injuries and safety benefit is considered, it’s easier to see the wisdom in investing in injury prevention and championing proactive safety programs.