Calculating the True Cost of a Workplace Accident
The direct costs of workplace injuries are pretty clear, but the indirect costs can be greater. Read more to help calculate the true cost.
At the bustling Lisi Aerospace - Hi Shear Corp. plant in Torrance, California, among the 680 employees is a group of highly experienced machinists, some with more than 30 years on the job. The challenge is that when one of these workers gets injured, the costs can be high. It can take up to three weeks to train a replacement, there’s equipment down-time, interrupted schedules and other costs that may not be obvious at first.
Facility managers everywhere are concerned about keeping employees and customers safe in their facilities. The direct costs of injuries and illnesses are pretty clear: those claimed under worker’s compensation insurance and/or disability insurance. But did you know that the indirect costs – those not directly related to the injury but occurring as a result of the injury – can be even greater? Because there is no such thing as a “typical” injury, indirect costs can be difficult to compute. The American Society of Safety Engineers (ASSE) puts the ratio of indirect to direct costs anywhere from 1:1 to 20:1.
These indirect costs include, of course, the lost time of the injured employee. The Bureau of Labor Statistics estimates, for example, that for workers in construction, each nonfatal occupational injury or illness in 2015 resulted in 13 median days away from work. There is also lost time for the other employees who stop work to treat the injured person.
The indirect costs mount from there: supervisors and foremen need to investigate the cause of the accident. Damaged machinery, tools and other property may need to be repaired or a spill cleaned up. You may need to train a new employee to replace the injured one or make arrangements for the work to be done by someone else. And there may be legal fees, plus management time spent dealing with regulators and attorneys.
How costly is all of this? According to the 2017 Liberty Mutual Insurance Workplace Safety Index, workplace injuries and accidents that caused employees to miss six or more days of work cost U.S. employers $59.9 billion in 2014, the most recent year for which statistically valid injury data are available from the U.S. Bureau of Labor Statistics (BLS) and the National Academy of Social Insurance.
Employers typically apply administrative controls, engineering controls, and finally, PPE to reduce the risk of injury. But effectively reducing accident rates may also require, in some cases, a cultural change within the organization.
At Lisi Aerospace - Hi-Shear, which manufactures fasteners for the aerospace industry, hand lacerations are one of the most common injuries, because the machines produce a lot of metal chips. Laura Forrester, environmental health and safety manager at the plant, discussed this with her Grainger account manager, Bernadette Stevens. As part of a new, employee-based PPE initiative, Lisi Aerospace - Hi-Shear partnered with Grainger to find appropriate gloves for workers at each machine. “At first there was some apprehension,” Laura says. “Employees were wary of yet another PPE item to use, and worried that the gloves might be cumbersome.” Another issue, she says, is that the company needed a cultural change to get employees to buy in to an improved safety program. Bernadette brought many different samples for employees to try out and choose from. After the safety committee made its selections, Bernadette set up a bar-coded, Vendor-Managed Inventory (VMI) system to maintain the glove supply in each department.
Within two months, the plant saw a 20 percent reduction in hand lacerations. “The biggest benefit, obviously, was the reduction in injuries,” Laura says. “But there is also a different attitude in employees. They see that we are trying to make it better and safer for them. It’s the culture change we wanted.”
Given the high – and often hidden – costs of accidents, employers are increasingly turning to PPE and other safety products for preventing injuries or making them less severe. According to the National Safety Council, Injury Facts 2014 Edition, various studies have shown that $1.00 invested in injury prevention returns between $2.00 and $6.00.
Protecting Your Employees
You can offer your employees a variety of PPE and other safety products. Sprains and strains, which account by far for the most injuries in five key industry sectors – construction, manufacturing, retail, educational and health services, and leisure and hospitality (according to the Liberty Mutual Workplace Safety Index) – can be reduced by using such products as back supports, body belts, hydraulic hand trucks and anti-skid tape. Cuts/lacerations/punctures, another leading category of injury in those sectors, can be reduced with protective gloves, safety glasses, protective clothing and protective face shields. And a variety of injuries can be prevented by the use of traffic safety equipment such as barricade lights, safety and security mirrors, and clear and well-placed signage.
Safety is the right thing to do for your employees. It’s also the smart thing to do for your company’s bottom line.
American Society of Safety Engineers – Indirect Costs of Accidents
U.S. Department of Labor, Bureau of Labor Statistics, Nonfatal Occupational Injuries and Illnesses Requiring Days Away From Work, 2015 – Table 1
Safety and Health Magazine, The ROI of Safety, May 2014
Additional source for this article: International Safety Equipment Association, “Personal Protective Equipment: An Investment in Your Workers’ and Company’s Future”