Jan 25, 2014

Direct and Indirect Costs of Workplace Injury

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Workplace Injury Costs

When workplace injuries occur, it’s easy to see the immediate and direct costs, but there are a multitude of ongoing and indirect costs that should also be taken into account. Indirect costs can be three to 10 times higher than direct costs, depending on the business and the various circumstances following the accident. Preventing workplace injuries not only keeps your employees safe, it also prevents these potentially significant costs.

Direct Costs

For a self-insured employer, direct injury costs include:

  • Claim Cost – 80%
  • Administrative Cost -10%
  • Excess Premium -8%
  • Other – 2%

These direct costs can be broken down into the following categories:

Medical

  • Hospital
  • Physicians
  • Pharmacy
  • Physical Therapy

Indemnity Payments

  • Disability Compensation
  • Dependent Benefits
  • Death Benefits
  • Settlements
  • Legal Expenses
  • Investigations

Program Costs

  • Excess Premium
  • Claims Administration Expenses
  • Other (Surety, Assessments, Taxes, etc.)

Indirect Costs

In addition to these direct costs, there are many indirect costs that should also be considered. Indirect injury costs include, but are not limited to:

  • Lost of Productivity or Service Standards
  • Additional Supervision Time and Administrative Costs
  • Temporary Labor and Overtime Costs
  • OSHA Fines
  • Building and/or Vehicle Damage
  • Equipment Damage
  • Product/Material Damage
  • Emergency Supplies
  • Interim Equipment Rentals
  • Accident Investigation Costs
  • Accommodations/Modifications Made for Injured or Potentially Disabled Worker
  • Recruiting, Hiring and Training Replacement Workers
  • Loss of Business and Goodwill

These indirect costs may vary from case to case, making the total cost of a workplace injury difficult to fully assess.

Emotional Costs

Another significant indirect cost of workplace injuries is the emotional toll that perceived safety risks can have on employees. Employees want to work at a place of business that is safe and well managed, and where management cares about their safety. Employers can reinforce the confidence in the safety of their workplace by creating programs that integrate with the normal course of business, recognizing employees for working safely, and maintaining a positive message of safety as a priority.

The potential for high costs is yet another reason to be vigilant on the issue of workplace safety. Check out our blog for more tips, guidelines and resources for increasing workplace safety.