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OHS from a Strategic Perspective Series - Lesson 2

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 2: The Cost of Workplace Injuries continued…

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

Property Damage

“Many workplace accidents lead to damage to the physical plant or equipment, or to product. There may be costs related to cleaning up spills or debris (for example, costs of cleaning products/absorbents or degreasing products, and costs of labour to perform the cleanup). Fire damage can be especially expensive to clean up.”

“Where machinery is damaged, the company should take into consideration not only the cost of repairs to the machinery, but also the cost of renting replacements while the repairs are made. In some cases, even where there is no damage to equipment, and investigation by the MOL may lead to orders prescribing the replacement or retrofitting of equipment implicated in the accident.”

“Finally, the cost of any spoiled product must be taken into consideration. Stopping a manufacturing process may lead to wastage, and product may be damaged through being spilled, dropped , or otherwise mishandled.”

Lost Productivity

“There are two kinds of personnel-related costs that can result from an accident: those that related to the temporary or permanent replacement of the injured employee(s) (these will be discussed in the next section), and those that flow from changes to the work responsibilities of employees who remain on the job.”

“For example, if an accident causes debris or damage to the premises or equipment, production may need to be halted until the problems can be resolved. Some workers who normally work in profit-generating roles may instead need to devote their time to repairs or cleanup. Once production resumes, the remaining workers may need to work overtime to make up for delays, and supervisors will bear the burden of having to schedule overtime, arrange for replacement workers, and training replacements to do the absent workers’ jobs.”

“After especially serious accidents, workers who witnessed the accident may suffer from lowered morale, which can influence productivity. Time off for counselling may be appropriate to assist some workers in dealing with the fallout from the accident, and this time away may require coverage by others workers, sometimes at a premium rate.”

Recruitment and Training Costs

“Where the injured employee is expected to be off work for an extended period or permanently, the employer will need to arrange for a replacement. The recruitment process, and the training that will follow it, both have an impact on productivity and cost money.”

“The impact of the loss of an injured employee is magnified in cases where the employee possessed unique skills. While the company searches for a replacement, work may be inefficient as other employees scramble to do his specialized job. Replacing him may take a great deal of time, or else the employer may need to pay for special training, education, and/or certification for the replacement worker. In some cases when an employee is off the job, the greatest loss is in the form of a loss of business advantage. Some employees are valuable to the company because of their broad knowledge of the business’s operations, their experience in the industry, or their contacts. Such employees are irreplaceable, their experience in the industry, or their contacts. Such employees are irreplaceable, and the cost to the company when they are lost to injury-while difficult to quantify-is substantial.”

“If an injured employee is away fro an extended period before she returns, or if she returns with a disability that requires accommodation, the employer will incur costs associated with retaining her to adjust to an altered-or totally different-job.”

Administrative Costs

“Accidents also entail considerable administrative costs. The accident must be documented, and sometimes investigated. This can require a time expenditure by the human resources department, as welll as the safety engineering/occupational hygiene department (if there is one). Finally, senior management will need to review the results of any investigation and spend time coming up with suitable remedial actions-an effort that can sometimes involve the hiring of a specialised consultant.”

“Certain accidents must be reported to the MOL within fairly tight deadlines,; should the MOL decide to conduct its own inspection or investigation, the employer will need to designated one or more workers (usually , the Health and Safety Representative or a member of the JHSC0 to accompany MOL representatives during the inspection.”

“Payroll staff will need to complete paperwork to document the injured employee’s absence from regular duty. The human resources department will also need to prepare the appropriate documentation to assist the employee in pursuing a claim under the WSIA.”

“Finally, where an employee is off work due to injury, the employer will be required to follow up with him on a regular bassis to monitor his plans for return, to support him in preparing to return, and to assess the ongoing validity of his WSIA claim and his eligibility for continued health services.”

“Opportunity costs are the difficult-to-estimate costs associated with lost chances. The understand opportunity costs, you can ask yourself the question ‘if only’. For example, ‘if only Manager Brenda did not spend half of Thursday and all of Friday arranging for the rental of a replacement widget snipper and arranging for repairs to the existing one (the one broken when the injured employee fell on it), what would she have done with her time’? Chances are, had their been no accident, she would have been doing other work that contributes directly to the company’s profit.”

“A company may also incur costs while working to prepare for safety inspections or audits. When a company’s poor safety performance attracts MOL’s attention, the company may be referred to a program called Workwell, which conducts compulsory occupational health and safety audits. When a company fails an initial Workwell audit, it is given six months to make recommended changes. Making these changes can involve purchasing equipment, upgrading existing equipment, and hiring occupational health and safety consultants. The cost of making post-audit changes can easily exceed $10,000 for a small company, but failure to pass the second, follow –up audit can result in a penalty in the form of a percentage of the company’s WSIA premium being imposed. The maximum penalty available is 75 percent of the premium, to a maximum of $500,000.”

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