On-the-Job Accidents: What You Don’t Know Can Really Hurt You

Like an iceberg lurking undetected at sea, unforeseen workplace injuries are not only damaging, but can be very costly.  The mutual goal is to eliminate the potential for employee injuries.  But beyond this obvious and most important motivational force, there is another actor to consider in regard to workplace accidents – the indirect, or “hidden,” costs associated with each injury claim.

For every dollar of direct costs, medical costs and compensation payments typically paid by the insurance company, there are substantially more dollars required to cover the hidden costs.  These costs are usually the responsibility of the employer and most often include:

  • Lost productivity of an injured worker
  • Cost of interrupted production
  • Overtime paid to other employees to fill the void
  • Hiring and selection costs
  • Training cost for substitute workers
  • Lost time and productivity spent investigating the accident and/or processing paperwork
  • Equipment damage and third-party liability
  • Lost clients or related revenue

While it’s difficult to place an exact dollar amount on hidden costs, studies have found the indirect cost of a Workers’ Compensation claim can be 4.5 times the direct cost.

An example of the impact indirect costs can have on a company’s bottom line can be found in a seemingly harmless back injury claim.  The compensable injury could have a diagnosis that requires surgery and subsequent physical therapy and could easily cost $50,000 or more in medical and indemnity benefits. If a company incurs, this $50,000 loss due to injury, illness or damage, and still tries to a make three percent profit, it theoretically must increase sales by an additional $1,667,000.

Fortunately, there’s a sold line of defense against the hidden costs that result from workplace accidents, and it begins and ends with prevention. Take the proper steps to avoid an injury and there will be zero costs- direct or indirect.  The key is an effective safety program that educates workers in accident and injury prevention.