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Lower Costs by Implementing Safety Programs - August 2017
country, employers pay almost $1 billion per week for direct workers’
compensation costs alone, which comes straight out of company profits. In fact,
lost productivity from injuries and illnesses costs companies roughly $63
billion each year.
According to the
Occupational Safety and Health Administration (OSHA), workplaces that establish
safety and health management systems can reduce their injury and illness costs
by 20 to 40 percent. Safe environments also improve employee morale, which
positively impacts productivity on the manufacturing line.
business climate, these safety-related costs for manufacturers can be the
difference between reporting a profit or a loss. Industry studies report that
companies who focus on safety as a core business strategy come out ahead. The
American Society of Safety Engineers reports that implementation of an OSHA
consultation program reduced losses at a forklift manufacturing operation from
$70,000 to $7,000 per year.
Use these tips
to understand how implementing safety programs will directly affect your
company’s bottom line.
the value of safety to management is often a challenge because the return on
investment (ROI) can be cumbersome to measure. Your goal in measuring safety is
to balance your investment vs. the return expected. Where do you begin?
There are many different approaches to measuring the cost of safety, and the way
you do so depends on your goal. Defining your goal helps you to determine what
costs to track and how complex your tracking will be.
For example, you
may want to capture certain data simply to determine what costs to build into
the price of your products, or you may want to track your company’s total cost of
safety to show increased profitability, which would include more specific data
collection like safety wages and benefits, operational costs and insurance
can be time consuming, general cost formulas are available. A Stanford study
conducted by Levitt and Samuelson places safety costs at 2.5 percent of overall
costs, and a study published by the Economist Intelligence Unit (EIU) estimates
general safety costs at about 8 percent of payroll.
If it is
important for your organization to measure safety as it relates to
profitability, more accurate tracking should be done. For measuring data,
safety costs can be divided into two categories:
Direct (hard) costs,
- Safety wages
- Operational costs
- Insurance premiums
and/or attorney’s fees
- Accidents and
- Fines and/or
- Indirect (soft)
costs, which go beyond those recorded on paper, such as:
- Repairing damaged
machinery and line equipment
- Worker stress in the
aftermath of an accident resulting in lost productivity, low employee morale
and increased absenteeism
- Training and
compensating replacement workers
- Poor reputation,
which translates to difficulty attracting skilled workers and lost business
soft costs, minor accidents costs are about four times greater than direct
costs, and serious accidents about 10 to 15 times greater, especially if the
accident generates OSHA fines or litigation costs.
IRMI, just the act of measuring costs will drive improvement. In theory, those
providing the data become more aware of the costs and begin managing them. This
supports the common business belief that what gets measured gets managed. And,
as costs go down, what gets rewarded gets repeated.
OSHA studies indicate that for every $1 invested in
effective safety programs, you can save $4 to $6 as
injuries and fatalities decline. With a good safety program in place, your
costs will naturally decrease. It is important to determine what costs to
measure to establish benchmarks, which can then be used to demonstrate the
value of safety over time.
Also, keep in
mind that your total cost of safety is just one part of managing your total
cost of risk. When safety is managed and monitored, it can also help drive down
your total cost of risk.
Considering the statistics, safety experts believe
that there is direct correlation between safety and a company’s profit. We are
committed to helping you establish a strong safety, health and environmental
program that protects both your workers and your bottom line. Contact us today
at (619) 297-3160 to learn more about our value-added services.