Workers get hurt every day in factories and warehouses all over America. When an unfortunate incident happens on the job, it can be devastating to any organization.
Even when the injury isn’t significant, it’s not difficult to begin hemorrhaging money. Most people know that workplace injury costs are high, but what do the totals really look like?
The following section highlights the cost of workplace injury in terms of immediate cash flow and collateral expenses, monetary and otherwise.
Two Types of Injury Costs
There are two types of costs associated with workplace injuries — direct and indirect. A direct cost (sometimes called “cash flow” loss) occurs due to the injury and comes directly out of pocket.
Typically, the direct price of a work-related injury is the cost associated with a worker’s compensation claim. The average claim costs most organizations around $40,000 out of pocket.
The second and often more expensive cost associated with injury happens indirectly.
An indirect cost is any unbudgeted expense associated with a workplace injury. In many cases, the indirect costs total three to four times the direct costs.
Production costs include overtime pay budgeted for other employees who cover the injured worker’s production. A reduction in work quality is non-monetary but certainly falls under the category of an indirect production cost.
When a worker is injured, production stops on all levels. Employees in the immediate area cease production, and management must stabilize the worker and mitigate any excitement or overreaction caused by the injury.
Fines, Penalties, and Compliance Issues
This is likely the costliest collateral impact on any company during an accident. Any company unfortunate enough to suffer the wrath of regulatory compliance issues pays a monetary cost and deals with any penalties dealt against the company. These penalties could include a loss of specific licenses or privileges, leading to a significant downgrade in revenue.
HR and Third-Party Costs
Costs associated with human resources can mount quickly. Attorney fees, third-party consulting and instructor costs, and other advisory services have a substantial price tag.
Bad Publicity/Tarnished Reputation
This is potentially the most underestimated cost associated with work-related injuries. Not only does a company face the possibility of negative publicity via the media and public eye, but future hiring could suffer as well.
New talent may be reluctant to apply for more skilled roles or higher positions within the company if your organization is associated with regulatory compliance fines or safety issues. It’s a dark cloud that no owner or GM wants hanging over their department or company.
The Complete Cost of a Work-Related Injury
It’s easy for employees and managers to lose sight of how much a workplace injury costs when they’re on the wrong side of the desk. According to the National Council for Occupational Safety & Health (COSH), the typical cost per employee who suffers a severe occupational injury was $44,000 in 2020.
On top of that, COSH estimates that the national average for indirect costs of nonfatal injuries was almost twice as great ($90,000). This comes to a total of nearly $140,000.
To put that into perspective, a company with an average employee wage of $20-$25 per hour could pay a full year’s wages of three or four workers on the money they’d lose to one injury. This doesn’t include the collateral damage, and often more detrimental restrictions imposed or licenses pulled.
What’s the Solution?
To prevent workplace injuries, you need to make sure you’re providing a safe workplace, and management constantly promotes safe practices. Employers also must ensure that safety programs adequately protect workers.
Safe systems should be able to detect unsatisfactory conditions, and supervisors and managers must enforce policies designed to mitigate dangerous work environments. Workers themselves play a large part in ensuring they stay healthy and the workplace remains safe.
They must maintain proper personal protective equipment, follow alcohol and drug use rules, avoid fatigue and exhaustion, and participate in training courses to improve skills and knowledge.
This may include taking a hard stance against employees who dangerously border compliance and safety violations in some instances. Preemptive measures like fines and other disciplinary action ensure employees remain mindful of the issue if it’s team-member-related.
Ultimately, the most proactive approach is investing in quality workplace safety training providers to provide a comprehensive plan to optimize the environment at your company. These expenses quickly pay for themselves several times by matching safety curriculum experts to your organization’s most teachable instructors.