The Hidden Costs of Workplace Accidents

Asking an employee why he or she wants to be safe is like asking them why they work. Overwhelmingly, every roofer I ask this question to tells me he or she wants to go home at the end of the day. He doesn’t want to lose any time because losing time is losing money. And, believe it or not, money can buy happiness. A New York City carpenter once told me he fell 35 feet and broke multiple bones. He was out of work for two years, during which he collected $57,000 from workers’ compensation insurance. If he worked, he would have made more than $100,000 per year. In his words, “I almost lost my big house on Long Island and my high-maintenance wife.”

In addition to how accidents impact workers’ finances, they can seriously affect a company’s bottom line. A good Health and Safety Program can save a company money by cutting workers’ compensation insurance premiums; heading off needless, expensive and embarrassing OSHA citations; avoiding expensive and embarrassing lawsuits; increasing the efficiency of the workforce; and boosting workers’ morale, which consequently will improve their productivity. A good Health and Safety Program also will give a business owner peace of mind by knowing all his or her employees are working safely.

In my experience, project managers, job-site superintendents and crew foremen are the people who are reluctant to want job-site safety. They believe following safety standards slows the job down. Management is responsible for making money in a business that regularly grapples with close bids, tight schedules and limited job budgets. However, these factors do not take into account the “hidden” costs of workplace accidents. Oftentimes, accidents are more expensive than people realize because of these hidden costs.

Examples of Hidden Costs

Some costs created by accidents are obvious; for example, workers’ compensation claims cover medical costs and indemnity payments for an injured or ill worker. What people often don’t think about are the hidden costs, like the costs to train and compensate a replacement worker, repair damaged property, investigate the accident and implement corrective action, as well as maintain insurance coverage. Even less apparent are the costs related to schedule delays, added administrative time, lower morale, increased absenteeism and poorer customer relations.

Washington, D.C.-based OSHA’s Safety Pays Program states the lower the direct costs of an accident, the higher the ratio of indirect to direct costs. The more accidents that occur in a workplace, the higher the costs in increased insurance premiums and greater indirect costs. According to the Boca Raton, Fla.-based National Council on Compensation Insurance Inc., these include the following kinds of indirect costs:

  • Any wages paid to injured workers for absences not covered by workers’ compensation.
  • The wage costs related to time lost through work stoppage associated with the worker injury.
  • The overtime costs necessitated by the injury.
  • Administrative time spent by supervisors, safety personnel and clerical workers after an injury.
  • Training costs for a replacement worker.
  • Lost productivity related to work rescheduling, new employee learning curves and accommodation of injured employees.
  • Clean-up, repair, and replacement costs of damaged material, machinery and property.

Some of the possible indirect costs not included in these estimates are:

  • The costs of OSHA fines and any associated legal action.
  • Third-party liability and legal costs.
  • Worker pain and suffering.
  • Loss of good will from bad publicity.

The Human Factor

Direct and indirect costs certainly are motivation for preventing workplace accidents. In fact, when I ask roofing company owners why they want their employees to work safely, many automatically default to the money answer. However, in most cases, business owners are generous, caring members of their communities. I once sat across the desk of an owner of a large construction company after his team experienced a fatality. He asked me, “How do I look at myself in the mirror every morning, knowing one on MY guys didn’t go home today?” Even though he did not know this employee personally, he considered this worker one of his guys. Ultimately, it’s the human factor that is the most important reason to ensure safe working conditions on job sites.

My favorite phrase is “To protect my employer, I protect his employees.” I think they’re words to live by.