Workplace injuries and the bottom line: indirect incident costs are staggering

This week the Intelex Blog introduces its newest contributor, Robert Smith. Head of Injury Management Solutions, Robert has tons of experience in Human Resource and Disability management, including a long stint with WSIB. Robert will blog on a biweekly basis on issues related to compensation, claims management, case management, and much more. This week Robert tackles the real costs of workplace injuries.

I have been directly involved in workers’ compensation issues for well over 20 years and, like many of you, I have heard the stories of the costs of a workplace injury and how important it is to implement health and safety programs and to manage claims. Yet time after time I have conversations with employers who still do not grasp the big picture. 

So what is the big picture? Most companies are aware of how their workers’ compensation premiums are calculated and that poor performance results in surcharges. Most are aware there are claim cost limits to seemingly protect them financially. But – and this is a big but – there are aspects that many do not calculate into their strategies. These are the “indirect” costs of the claim and can add from three to ten times to the direct claim costs. 

To put this into perspective let’s look at the claim cost for an Ontario NEER employer:

In 2013 the Claim Cost Limit is $416,000.00. If you take just the minimum indirect cost factor of three, the actual cost is $1,248,000.00. Considering the worst case scenario at ten times the actual cost is a staggering $4,160,000.00

These indirect costs include:

  • Damage to equipment, machinery, materials, facility, etc. 
  • Production downtime. 
  • Lower employee morale. 
  • Loss of products or services. 
  • Delays in shipment or filling orders. 
  • Additional overtime. 
  • Managers’ lost time resulting from the accident. Also includes inspections, investigations, meetings, and administration. 
  • Employees assisting with the accident. Includes administering first aid, and witness interviews. 
  • Hiring and training replacement workers. 
  • Wages of replacement workers. 
  • Other non-productive time incurred by the injured employee. Includes all medical related appointments. 
  • Potential MOL, OSHA penalties. 
  • Legal fees.
Although this list is quite long it still doesn’t encompass every indirect cost. Understand that for each injury that occurs in your workplace, the increase in your workers’ compensation premiums is dwarfed by all of the indirect costs associated with that injury. Now is the time to take the necessary steps to limit, or better yet, eliminate all injuries to ensure your company’s maximum productivity and profitability.
Questions or comments? Post below or contact Robert.

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