Employee Injuries: What Is the Real Cost to Employers?
When an employee is injured, the costs — both direct and indirect — are often more than an employer could have ever anticipated.
One of the most expensive — and unpredictable — financial liabilities for a company is employee injury. Workplace accidents that keep employees off the job for six or more days cost American companies over $1 billion a week in workers’ compensation — almost $60 billion a year — according to the U.S. Bureau of Labor Statistics (BLS). (Learn more about workers' compensation costs in 8 Steps To Reduce Workers' Compensation Costs).
The BLS reported 2.9 million non-fatal employee injuries and illnesses in 2016, about 2.9 incidents per 100 full-time equivalent (FTE) private industry workers. Although the number is almost 50,000 fewer than 2015, days away from work remained the same.
When an employee is injured, employers pay for more than the worker’s medical treatment. In its “NSC Injury Facts 2017,” the National Safety Council (NSC) calculates the average cost of an injury at $31,000. If an accident results in death, the cost skyrockets to at least $1 million. The NSC calculated the 2015 total cost at a staggering $142.5 billion, including $45.8 billion for lost wages and productivity; $31.4 billion for medical expenses; and $46.1 billion for administrative fees. Costs that aren’t covered by insurance include $11.3 billion for such items as incident investigation and the time needed to prepare and file reports. Damages from fires are $4.3 billion and another $3.6 billion is attributed to damage to workplace motor vehicles involved in the injuries.
Costs for employee injuries
Costs for employee injuries are broken into two categories: direct and indirect. Together, they represent all the expenses an employer faces when an injury occurs.
Direct costs are related to the actual injury and are easily recognized. They include:
- Hospital and clinic visits, including emergency treatment
- Physicians and other providers
- Prescriptions and pharmaceuticals
- Rehabilitation, such as physical or occupational therapy
- Compensation and Reimbursements
- Workers’ and disability compensation
- Legal expenses
- Settlement costs
- Higher premium fees
- Claims administration
Indirect costs are the result of the loss of the employee’s inability to work or be productive. They can be more difficult to identify. Some examples include:
- Loss of or impaired productivity
- Temporary labor: recruiting, hiring, and training
- Additional supervision time
- Overtime pay
- Inventory and property
- Building and equipment damage
- Vehicle damage
- Product or material damage
- Interim rentals
- Penalties and other costs
- OSHA fines
- Temporary loss of business
- Investigation expenses
- ADA accommodation for the injured or disabled returning employee
- Intangible costs
- Loss of reputation or credibility
- Employee morale
What might the maximum cost of an injury be?
To get an idea of the maximum cost of an injury, OSHA, insurance companies or safety consultant groups offer calculators on their websites. Entering the NSC’s average of $31,000 per injury reveals the following breakdown:
- Direct cost: $31,000
- Indirect cost: $124,000
- Total cost: $155,000
- Profit margin of 10% means that $1,550,000 revenue is needed to offset the injury
The emotional cost of injury
The emotional cost of injury is difficult to quantify. Every employer wants to provide a safe and reliable workplace. Every employee wants to feel confident that the company has taken all measures to reduce the risk of injury. If an accident occurs, they also want to know the event was handled properly, investigated well, and that appropriate corrective steps have been taken.
After a worker is injured, employers can expect that productivity will take a temporary dip. The employee’s co-workers will be concerned about their colleague, but also about how the accident will impact them. Will they have to pick up the slack? Work overtime? Train a temporary employee? It’s important for employers to assure all workers that safety is a top priority and that solutions are in place to prevent further injuries.
How much work time is lost due to injuries?
Another factor for employers to consider when determining the actual cost of employee injuries is how much work time is lost. The NSC estimates that in 2015, 65 million days were lost due to workplace accidents—and that doesn’t count the time lost on the day of the injury. Even past injuries affect a company’s bottom line. The NSC found that permanent disabilities from injuries obtained in years prior to 2015 still resulted in 35 million lost work days in 2015. And looking ahead, NSC predicted that employees who were injured in 2015 will account for 50 million lost work days in years to come.
What are the most common and preventable workplace injuries?
- Overexertion: Poor body mechanics when pulling, lifting, holding, or carrying (Learn more in Pushing, Pulling, Lifting: Ergonomic Best Practices to Follow to Avoid Injury)
- Slipping or Tripping: Wet or uneven floors, as well as objects in pathways
- Falling from heights: Not only from ladders, but also down stairs
- Reaction: Almost falling on slippery surfaces on tripping on edges of rugs
- Falling objects: Poorly stored or stacked items usually hit heads
It’s clear that workplace safety programs that include a strong prevention component can be useful for all companies. Beyond the training mandates, such as those required by OSHA, employers can invest in safety by maintaining awareness and promoting a constant culture of accident prevention. Employees are a company’s most valuable asset. They will be happier and more productive when they feel protected.