It may seem callous to look at worker safety from the standpoint of profit vs. cost. But let’s face it: There are those who don’t see the value in making the necessary investment in jobsite safety. Oh, they may espouse “Safety First” and have signage reflecting this message across their jobsites. Yet, when it comes to application, the message falls short, and they end up playing Russian roulette with their workers’ well-being.
You hopefully aren’t one of those who subscribe to this perspective on safety. But even those who make a concerted effort to maximize safety on their sites need occasional reinforcement as to why this investment pays off. As for those who don’t, here’s a breakdown of the costs of worker injuries and fatalities in hard terms that might just prompt them to reassess their current approach.
Mega-costs of Safety Fails
According to National Safety Council estimates, the cost of work injuries per worker in 2017 was $1,100*. The cost per injury requiring medical consultation/attention was $39,000, while the cost per fatality was a whopping $1,150,000. These figures include estimates of wage losses, medical expenses, administrative expenses and employer costs, but not property damage costs except to vehicles.
Now add in the potential expense of fines should an employer be found negligent in the incident. As of January 2019, the maximum penalty amount per willful or repeat violation was set at $132,598 per violation. Keep in mind that most accidents on construction jobsites typically result in multiple citations.
Such estimates are based on the direct costs of workplace injuries and illnesses. There are indirect costs that must be factored in, as well. They can include:
- accident investigation and implementation of corrective measures
- repairs of damaged equipment and property
- training replacement employees
- lost productivity
- costs associated with lower employee morale and absenteeism
- damage to reputation and potential loss of business
- challenges in employee retention or hiring
Given so many variables, it’s virtually impossible for companies to get a true picture of the costs of workplace injuries. However, OSHA’s $afety Pays program can give you some concept of the potential impact to your company’s bottom line.
The $afety Pays program uses your company's profit margin, the average costs of an injury or illness and an indirect cost multiplier to project the amount of sales your company would need to achieve to cover those costs. The calculation below (click on image to enlarge) based on a single worker concussion and a 3% profit margin should give you a better picture of just how expensive even a relatively minor injury may be.
OSHA $afety Pays
Safety Saves More Than Lives
Perhaps a better way to view safety is not as a cost but as a long-term investment in your company's profitability. For example, one way safety has a direct impact on the bottom line is in workers’ comp insurance costs. Insurance companies use your firm’s experience modification rating (EMR) to develop the premium for workers comp coverage. A company with a good safety record and a lower EMR (below 1.0) will typically pay far less in premiums per year than one with a higher EMR.
A poor safety record with a higher EMR can affect a company’s ability to bid on certain types of work, as well. The company may be unable to bid on government projects, or may lose out on large commercial projects due to its weaker safety standing.
To delve even further into the benefits, Dodge Data & Analytics began conducting studies on safety management practices in the construction industry in 2012. Conducted every three years, the study results have consistently shown that contractors experience a payback from their safety investments.
Findings of the 2017 study on the impact of safety practices on projects show:
- 38% of contractors surveyed saw a positive impact on their budget
- 73% saw a reduction in reportable injuries
- 63% saw an impact on quality
- 79% saw an impact on jobsite workers’ willingness to report unsafe conditions
In addition, the study found that:
- Nearly three-quarters (72%) of contractors reported safety practices having a positive impact on their standing in the construction industry
- Over two-thirds report they believe implementation of safety practices has a positive impact on their ability to find new work
- Forty-four percent believe that their safety practices had a positive impact on staff retention
“Consistently, contractors have reported that they receive project and business benefits from safety,” says Steve Jones, senior director, industry insights research at Dodge Data & Analytics. “Safety investments clearly pay off in measurable ways and in ways that are harder to quantify, but that still have a major impact on a contractor’s business.”
To learn more about how specific investments in safety can pay off, go to the CPWR's online ROI Calculator. It allows you to use your own cost data to calculate the potential ROI from adopting a safer tool, material or work practice.
*Note: This is not the average cost of a work-related injury