By Joe Gillian, CSP, ALCM, CRM, Director of Loss Control, IWIF Workers’ Compensation Insurance, Maryland’s largest provider of workers’ compensation insurance (www.iwif.com). He can be reached at 1-800-264-IWIF or firstname.lastname@example.org.
Most of the iceberg that sank the Titanic was hidden below the waterline. In a similar way, hidden costs of an employee’s workplace injury could sink a business.
In the case of most icebergs, only one-eighth of the mass is exposed. In the case of a workplace injury, however, as little as one-tenth of the ultimate cost may be apparent, leaving nine-tenths of it hidden and with potentially disastrous effects on a business.
To avoid such an occurrence, business owners must understand just how far-reaching workplace accident costs extend to other areas of their business. Only then can business owners understand how and why these hidden expenses sink profits and raise soft costs.
Direct costs of a workplace accident
When an employee suffers a job-related injury or illness, the accompanying pain and discomfort are compounded by the immediate cost of treatment for the condition. Then may come the additional medical costs: physician and hospital bills, prescription medicine, occupational therapy, and medical equipment, such as crutches and wheelchairs. Most of these direct costs are covered by the workers’ compensation insurance policy that the business owner must provide under Maryland law.
Indirect costs of a workplace accident
An accident that causes a worker’s injury often will have costs that are absorbed with the operations. Examples of hidden costs can include:
-Damage to the vehicle or equipment the worker was using at the time. This could require expensive repair or replacement.
-Loss of the worker’s time. There may be loss of time by fellow employees and supervisors responding to the injury-causing incident.
-Temporarily lowered morale, efficiency, and productivity by co-workers and supervisors.
-Cost of hiring and training a temporary or permanent replacement for the injured employee, with lower productivity during the hiring and training process. This loss could be substantially higher if the injured employee is a salesperson who has a solid rapport with customers.
Other indirect costs include such factors as a surcharge on the company’s insurance premium if the accident throws the organization into a higher risk category. Other costs may include civil or criminal penalties imposed by state or federal officials if the accident is found to have resulted from flagrant violation of workplace safety requirements.
Studies have shown that such indirect costs usually total three to four times the direct costs of the accident and could amount to as much as 30 times the direct costs. Not many businesses could withstand such a hit to their bottom line.
Benefits of a workplace safety policy
Workplace safety is a real bargain when compared with the vast expenses associated with a work-related accident. To protect the health of employees and the well being of the company’s bottom line, develop and implement a workplace safety policy. The ultimate goal of a workplace safety policy is to communicate to all employees that worker safety is important, is supported by management, and is valued by the entire organization.
In most cases, your workers’ compensation insurer or a safety consultant can help you analyze your company’s potential safety hazards and help you develop a safety plan that will allow your organization to steer clear of the hidden costs of injuries.