Accidents in the workplace have a double impact: on the personal level and on the financial level. On the personal level, no responsible business owner wants to see an employee injured. However, the financial impact of workplace accidents is not always understood.
Workers’ Compensation is designed to guarantee an injured worker medical treatment, compensation for lost wages and any permanent impairment, vocational rehabilitation and a death benefit for survivors. By providing this insurance for workers, employers cannot normally be sued by injured workers.
After an accident, an employer will pay more for their Workers’ Compensation insurance. What’s not always clear is just how much that accident will cost.
Indirect Costs of an Accident
The Stanford University Department of Civil Engineering did a study and discovered that the indirect costs of a workplace accident are greater than the direct costs. For example, if the direct costs of the injury were $50,000, the indirect costs would be $55,000.
Those indirect costs include:
1. Wages not covered by Workers’ Comp, wage costs related to lost work and overtime expenses;
2. Wages for all of those handling the claim;
3. Hiring and training a replacement for the injured worker;
4. Lost productivity, cleans up and machinery costs.
The Actual Accident Costs
Suppose that the employer’s base rate for Workers’ Compensation insurance, with no claims, is $150,000. The company would receive a modification before any accidents of 66%, reducing the actual premium to $99,000. One $50,000 claims would increase the modification by 15 points, for three years. Instead of $99,000, the premium would now be $121,500. Over three years, that one accident would cost an additional $67,500.
The indirect costs plus increased premiums from that single accident would total $122,500. If the business has a 10% profit margin, it would need additional sales of $1,225,000 to cover that.
Safety Consulting is Cost-Effective
Few small or medium-sized businesses have a safety expert on staff, but they need one. If increased safety awareness, training and procedures prevented even one accident, that would be cost-effective. Safety Consulting effectively addresses this business need by giving the business the benefit of the advice and experience of a Certified Safety and Health Official.
The Arnold Group offers a flexible solution that meets the needs and budget of any business. Not all accidents are preventable, but learning safety weaknesses and solutions from a professional could prevent serious injury to a valuable employee as well as preventing increased insurance costs.
