...Is Developing, Implementing and Managing a Company Safety Program Really Work The Cost?

I have a question for you today and that is . . . Is developing, implementing and managing a company safety program really worth the cost?

Now before you continue reading, take a moment and really think about it!

What was your answer? Was it yes, was it no, or are you one of those who isn't really sure?

Let's take a look at some numbers and see.

According to information provided in a report by a nationwide insurance company, approximately 60% of company executives figure that their companies save $3 for every dollar spent on safety programs. A $5,000,000 company that spends 1% of their budget on safety can figure to save approximately $150,000. OSHA puts the savings figure to be more likely $6 for every $1 spent. That would be a savings of $300,000.

If an employee is injured, an insurance company reported that for every dollar cost of an accident, approximately $3-$5 additional dollars are spent as indirect costs. Therefore, if an accident costs a company $10,000, an additional $40,000 may be spent on average for that injury, costing the company a total of $50,000.

So how much money does that $5,000,000 company need to make to recoup that $50,000? Assuming the company has a profit margin of 8%, the company will need to increase revenue by an additional $625,000.00 (or 12.5%).

Based on the information above there is absolutely no doubt that successfully implemented safety and health programs can improve a company's bottom line. But when it comes to breaking down the cost associated with accidents in the workplace, that's when it can get a little more difficult to quantify.

So for the next couple of weeks I thought we would review the costs associated with workplace accidents. Today we'll start with the direct costs and we'll cover the indirect costs next week.

Direct Costs

These expenses include the obvious accounts that are easy to calculate and tend to be associated with the immediate, or close to immediate, reaction to an incident. They include:

• Workers' compensation costs. Workers' Compensation payments are determined by the cost of worker injuries, and the more accidents a company has, the more expensive the coverage gets.
• Fines. These can include OSHA penalties and other government penalties.
• Downtime and/or loss of production. Time is money and any organization must keep the job going. Injuries can cause major disruptions that result in the wasteful and expensive loss of work.
• Record keeping and paperwork. Injuries require a high volume of paperwork and record keeping and that means someone from your company is going to be busy doing something that is not directly related to what they normally do for your company.
• Damage to equipment or property. Many employee accidents involve equipment or property damage and that can get expensive.
• Legal fees. Where there's an employee injury, there is typically an attorney involved in some way or another.
• Increased insurance rates. If a workplace accident involves damage to equipment or property, then next year's premiums are likely to go up.

Those are some of the more common direct costs associated with workplace accidents and there may be a few that I haven't listed, but I'm sure you get the point. Direct costs associated with accidents in the workplace can add up very quickly.

And if you think those direct costs can get expensive just wait until you see the indirect costs next week.