An employee injury brings production to a complete halt. Concerned coworkers rush to aid their colleague. Work ends for hours as supervisors manage care for the injured, investigate, and document the incident. This scene is the employers’ nightmare.
When the hard costs for first aid, hospitals and doctors, and the injured’s lost time begin to add up, the employer discovers the harsh expenses of industrial medical care; and gratefully, they’re insured through workers’ compensation for most of it.
Then the managers begin to communicate regarding the indirect costs.
Why was production off last month?
Lost three hours on the line to tend to an industrial accident.Supervisor spent ten hours following up with hospitals, doctors and an incident investigation to understand how the injury occurred.Managers needed to buck up employee morale and communicate what the company is doing for the injured employee.Post-injury training programs were implemented to avoid the problem in the future.Executives dealing with any negative publicity.OSHA fines, hearings, documentation or just being shut down for their investigation.And these are just the most obvious indirect costs.
According to the OSHA website (February 16, 2015), their small business “safety pays” cost estimator calculates a hernia as $22,540 direct expenses and $24,802 indirect costs a total of $47,352.
Converting that total into gross production, or sales required to pay for that loss, that number soars to $826,760. The workers’ compensation provider will pay most of the direct costs of an injury; but the employer pays one hundred percent of the indirect costs, which are almost always higher.
No matter how you add up the numbers, industrial accidents cost the employers dearly. With a little reverse engineering, spending some money up front on safety and personal protection equipment seems very prudent. It’s much easier to keep morale high by showing concern about preventing accidents than bucking up the troops after one.
Obviously, nobody wants employees injured on the job. Cost accounting injuries is not about calculating how to press production forward at an acceptable rate of medical payments. It is about rationalizing prevention costs, understanding the value of workplace safety. Top management always must lead the safety program and hold it dear. Equally important though, is sharing the management of the program with employees. When everyone buys into this ethic, the company benefits through the safety dividend.
