Cost of Injuries

 The return on investment for safety is dependent on knowing one important thing:

• How much does an injury actually cost? 

Fully understanding all the costs associated with a workplace injury can be difficult. Several organizations–including the National Safety Council and the Centers for Disease Control and Prevention–have models that attempt to estimate the costs, but these different models can vary greatly, according to Ken Kolosh, manager of the NSC statistics department.

 For example, CDC’s estimate shows a fatal injury carries an average cost of about $991,027. This average includes only hospital costs. In contrast, the NSC model puts the average fatality’s cost to society at $1.42 million. These figures, although high, are likely to be lower than the actual cost of a single death because both models reflect only direct costs. Direct costs include workers’ compensation, medical expenses, civil liability or litigation costs, and property losses.

Indirect costs can be much more expensive: For every dollar in direct costs, indirect costs could be as much as $2.12, according to NSC. Indirect costs include workplace disruptions, loss of productivity, worker replacement, training, increased insurance premiums and attorney fees.

Using this math, a single fatal workplace injury goes from costing an average of $1.42 million to costing nearly $3 million on average. And this may be on the low end of the scale. Some studies have indicated that indirect costs for injuries in the construction industry can be as much as 17 times more than direct costs, depending on the type of incident, NSC states. Despite the variances in the cost-estimate models, Kolosh stressed that the cost savings from safety are real. “Safety’s not just a nice thing to do,” he said. “It has a lot of economic relevance as well.”

Selling The Boss

For safety professionals whose bosses, managers or employers don’t “get it,” selling the idea of investing in safety can be difficult. Safety professionals usually first argue from the “people” side of things–to invest in safety so workers do not get hurt, for example. But don't neglect the financial return on investment, i.e., increased productivity, improved customer service, money savings from fewer injuries, etc., could help with the sell too. Not every workplace safety improvement will have an obvious business benefit at first–other than improved safety.

As an example, consider a Schneider Electric facility that had a conveyer system at floor level. Although the system was considered a trip hazard, the company believed elevating the conveyor off the ground would be too expensive. But when an employee tripped over the conveyor and broke a hip, the company knew the system had to be raised. The conveyer system cost about $1 million to elevate. What they discovered was that in addition to improving safety by reducing a trip hazard, the change actually improved the process and increased productivity. Since then, the conveyer system has more than paid for itself.

“On the onset of the business case, there was no justification for it,” Widdowson said. “But at the end of the day, we see improvements and productivity that we didn’t see up front.” This is something that has happened many times at Schneider Electric, a process or change is approved with safety improvement being the justification, and unforeseen benefits to business and/or production are discovered in the process.

Even though cost savings are a motivator, safety’s biggest return on investment may be human capital. Employers should not base decisions on whether a particular change will result in cost savings, but instead on whether it will keep workers safe. “I hate to go into the dollar savings. They’re there, but that’s not why we do it,” Widdowson said. “We don’t do this because of the dollars. We do this because of the people.”

Focus on what benefits people–employees–because what benefits the people benefits the company and the bottom line in the longer run.