Does a $afety for your Process?
$AFETY PAYS is a tool developed by OSHA to assist employers in assessing the impact of injuries and illnesses on their profitability. It uses a company’s profit margin, the average costs of an injury or illness, and an indirect cost multiplier to project the amount of sales a company would need to generate to cover those costs. Since averages are used, the actual costs may be higher or lower. Costs calculated using the example sample cost calculation worksheet does not reflect the pain and suffering of an injured employee. An organization can use this information to predict the direct and indirect impact of injuries and the estimated sales needed to compensate for these losses.
The follow link will provide a quick way to estimate the annual cost of injures in your workplace.
The "$afety Pays" program offers the following options:
- Choices from a set of Lost Work Day injuries and illnesses
- Prompt users for information to do the analysis
- I will allow users to input the actual loss figures or workers’ compensation costs
- The system will generate a report of the costs and the sales needed to cover those costs
As you will see from the calculations, injuries are more expensive than many managers realize. Why? Because there are many hidden costs that are not truly understood. Some costs are obvious while other costs are transparent. Workers’ compensation claims cover medical costs and indemnity payments for an injured employee and are the direct costs of injuries.
However, what about the costs to train and compensate a replacement employee, repair damaged equipment, investigate the injury and implement corrective actions. Even less added apparent are the costs related to product schedule delays, added administrative time, lower morale, increased absenteeism, pain and suffering of the employee, their family, and impaired customer relations. These are the indirect costs and usually are hidden.
According to OSHA, studies show that the ratio of indirect costs to direct costs can vary widely, from a high ratio of 20:1 to a low of 1:1. OSHA provides a conservative approach where they estimated that the lower the direct costs of an injury, the higher the ratio of indirect to direct costs.
For a list of Safety Pays – Success Stories you can check this out on the OSHA Web site. Also there is a great fact sheet that will help to sell your safety process. Do You Know How Much Accidents Are Really Costing Your Business – OSHA 1996
Therefore, implementing an effective safety system to reduce injuries can influence workers’ compensation premium costs. Lowering the frequency and severity of injuries will help to lower the experience modification rates (EMR) and manual rates that, in turn, lower workers’ compensation insurance premiums.
