OHS from a Strategic Perspective Series - Lesson 1

The key to understanding the importance of health and safety in your workplace is to comprehend the significance it plays in your overall cost analysis. STACS Inc. has developed this week long series guided towards assisting you in quantifying the costs of workplace injuries and comparing it to the costs of developing a successful health and safety program.

Lesson 1: Introduction and the Cost of Workplace Injuries

Brought to you from: Occupational Health and Safety in Ontario by Nora Rock

Introduction:

“In a presentation he gave at a 2006 Canadian Society of Safety Engineeringh (CSSE) conference, safety professional and CSSE Education Director Peter Sturm touched on how workplace safety professionals can best combat their image as “necessary evils” in the workplace.”

“This negative view of safety specialists is most often voiced in the stream of business thinking that lumps business functions into two main categories: ‘things that earn us money, and things that don’t.’ The popular term for a business function that falls into the ‘things that don’t’ category is ‘cost centre.’”

“Because safety is often viewed as a moral or ethical issue, neglecting it can have an impact on investment in the company by would-be shareholders. There has been an increase, in recent years, in the popularity of ethical investment- investment in companies that demonstrate superior ethics in a variety of contexts, for example, environmental responsibility or worker safety. Investors seeking to make only ‘ethical’ investments may prefer companies with a strong safety track record. “

“Any perspective on workplace health and safety that fails to consider the relationship between worker safety initiatives and a company’s financial health can probably be dismissed as short sighted. This is true even where only potential harm to the company’s public image is concerned. As you will learn [in this series]…however, worker injuries also influence the costs of production, and devoting appropriate resources to preventing them makes good sense.”

The Cost of Workplace Injuries:

“Insurance-based system has now replaced private-sector lawsuits for workplace injuries. While there is some variation in premiums associated with performance, in general, the WSIA system provides predictability for employers when it comes to the cost of compensating injured workers. However, this predictability relates only to the costs of the compensation claimed under the WSIB system (lost time, health care, future economic loss, and so on).”

“It is important to realize that the costs covered by the WSIB fund represent only a fraction of the total estimated costs of a workplace injury. In fact, most analysts agree that the total costs of an average workplace injury are at least four times the amount paid out in compensation to the injured employee.”

“Business Results Through Health and Safety, a 2001 publication developed by the CME and WSIB, reports that while the average lost-time injury claim filed with the WSIB in 1999 was over $11,771, the total estimated costs to the employer of an “average” injury were closer to $59,000. How can this be?”

“The answer is that when a person is hurt at work, there are a wide range of different kinds of costs, many of which are not reflected in WSIA premiums.”

“There are tools available to employers to assist in the caluculation of non-premium incident/accident costs. One example is the Costing an Individual Incident/Injury form provided by the WSIB as part of its Business results Through Health and Safety document (a simpler worksheet for the same purpose is included in the WSIB’s MAP Cost Tool document, which is intended for small business). This form, which is included in appendix F, encourages employers to take into account easily overlooked injury costs….the Ontario Safety Association for Community and Healthcare (OSACH) offers a similar tool for estimating the costs of a workplace injury or illness in the health care sector. “

Costing an Individual Incident/Injury Form

- from the WSIB

Name:

_______________________________________________________________________________________

Date and Time of Injury/Incident ____________________________________________________________

Location: _______________________________________________________________________________

Brief Description of Accident/Injury ____________________________________________________________

Injury/Incident Costing

Direct Injury Costs

Compensation/Medical/Rehabilitation Costs

Description of Injury: _________________________________________________

__________________________________________________________________

Time Away from Work: ___________ days/weeks

1. Compensation/medical/rehabilitation costs. (Use the “Estimated Actual Claim cost” $___________

from your organization’s latest NEER statement. If the claim has had the Maximum

Claim cap applied, use the value before the cap has been applied.)

2. Wage supplements/Continuation of benefits etc $___________

3. Other compensation/Benefit Related Costs $___________

Total Direct Injury Costs $___________

Indirect Accident Costs COST

Property/Equipment/Material Damage

Was there equipment or structural damage? Was it repaired or replaced? Was equipment

rented for temporary replacement? Was there material or product damage or loss?

Summary: _________________________________________________________

__________________________________________________________________

__________________________________________________________________

1. Costs of Cleanup/salvage $___________

2. Equipment Repair/Replacement Cost $___________

3. Property/Structural Repair Cost $___________

4. Equipment Rental Cost $___________

5. Material/Product Loss $___________

6. Material/Product Rework $___________

7 Business Results Through Health & Safety

Administrative Costs

Administrative costs include extra management and administrative time as a result of the

injury/illness. Examples include managing the accident scene, conducting accident

investigation and follow up actions, arranging compliance to MOL orders, rescheduling of

people and work, arranging / supervising clean up and salvage, arranging for repair or

replacement of equipment or other property, hiring replacement staff, training of replacement

staff, follow up with injured or ill employee, arranging for return to work and modified work.

1. Management effort at time of incident/injury $___________

2. Management effort: clean up, restoration, rescheduling, MOL order compliance, replacement hiring and training etc.$___________

3. Follow up with injured employee including return to work, modified work etc. $___________

4. Administrative effort in claims management, medical and personnel effort, public relations etc. $____________

5. Lost opportunity cost: If management had not been spending its time on incident follow up, what could they have been doing? What is the value of that lost opportunity?$___________

Productivity Costs

These involve the costs associated with the work interruption due to the incident, and ability

to carry out work following the incident. Calculations for these cost items will vary depending

on how your organization values the cost of work interruptions, equipment unavailability, and

reduced employee capability. There is also the lost opportunity cost, as above.

1. Work interruption at time of incident (# of people, length of interruption) $___________

2. How was work time made up: costs, overtime etc $___________

3. Rescheduling Costs: New set up, delays in equipment availability, idle people, time, costs $____________

4. Cost of learning curve of replacement employees $___________

5. Equipment out of service: MOL stop work orders, time to repair damage or replace. $___________

6. What was the impact of loss of use of equipment, processes, or skills of injured person $___________

- Alternate processes more costly, time consuming

- Customer Service issues: out of stocks, delays in delivery

- Scheduling inefficiencies

7. Cost of reduced productivity while employee on modified work. $___________

MOL Orders

1. Cost of complying with MOL orders $___________

- Equipment/process modifications

- Administrative Procedures

2. Consultant Fees $___________

Legal Costs

1. Legal Counsel Fees $___________

2. Management/Employee time (preparation, witnesses, etc) $___________

3. Expert Witness Fees $___________

4. Fines $___________

5. Other Costs (Settlements etc)

Other Costs

1. ______________________________________________ $___________

2. ______________________________________________ $___________

3. ______________________________________________ $___________

Total $___________

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