Everyone knows that running a business isn’t cheap, especially when you take into account the loss of time and money associated with work-related accidents. It can be quite shocking to learn just how much of a hit a company takes when a completely avoidable accident occurs. If an organization knows just how much accidents cost and take appropriate action to reduce the risk, it can save a huge amount in the long run! After all, good safety is good business.
An industrial accident is any uncalculated event that results in the ill health of people, damage or loss to plant, property, materials or environment, or a loss in business opportunity. Accidents that affect employees’ health can range from minor to fatal and can be caused by a myriad of issues such as slips on wet surfaces, malfunctioning machinery or exposure to hazardous substances.
Over the past 20 years new and improved safety measures have been implemented to better protect employees from harm. However, accidents still occur and are not completely preventable. Construction, for example, remains a high risk industry and the Health and Safety Executive (HSE) estimates that the industry accounts for 22 percent of fatal injuries and 10 percent of major reported injuries to all employees in Britain alone.
Cost of Accidents
HSE’s Annual Statistics Report for 2011/2012 reveals that workplace injuries and ill health cost Britain’s economy an estimated £13.4 billion. Of that, £8.2 billion was due to illnesses and £5.2 in injuries and deaths. Overall, there were 27 million working days lost (22.7 due to work-related ill health and 4.3 due to work-related injury). This equates to about 17 days per case, which can result in decreased production and quality of work.
When considering the impact of work-related ill health and injuries, businesses must take into account the direct costs (damage to equipment, repairs, investigation costs, downtime, sick pay, legal costs and court fines) and indirect costs (liability claims, impaired corporate image and training of replacement staff). Additionally, uninsured costs significantly outweigh insured costs. HSE estimates that the average uninsured losses are about 10 times more than the amount paid in insurance premiums. This means that for every £1 recovered in insurance, another £10 is taken directly from a company’s profits.
In addition to footing the bill for damage, employers oftentimes must pay financial compensation. In 2010/2011 £5.76 billion went towards financial costs, while £7.66 billion went to monetary rewards given to employees for “pain, grief and suffering.” This does not take into account the costs of long-term health issues such as cancer. Today, as employees age and develop health issues, more work-injury compensation claims are filed. Last year, 2,437 died from mesothelioma alone. Every year over 5,000 occupational cancer cases arise and thousands more die from cancer and other occupational disease like COPD.
A man working for a small company of 15 employees was using an unguarded drill when the sleeve of his jumper got caught. He ended up with severe tissue and muscle injury and two broken bones in his lower arm. He spent 12 days in the hospital and three months off of work. The managing director was found responsible, and as a result, the company had to pay over £45,000 for the wage of the injured worker, wage of replacement worker, legal and court costs, insurance premiums and loss of production among other expenses. This is just one example. Accidents that are not as drastic can still cost a lot, and when accidents continue to happen or multiple people are harmed, the costs add up.
The Bottom Line
The true costs of accidents can be exorbitant. Work accidents affect production, employee health, overall company culture the image of the organization. However, improved health and safety management will lead to fewer accidents and a decrease in monetary losses. Once a company has a better understanding of the causes and costs of accidents, it will easier to improve business practices and an organization’s financial standing.