Why invest on work health and safety
In our Series 1: Health and Safety Framework article we outlined that workplace health and safety is a legal responsibility of all employers. Apart from this legal responsibility, looking after the safety and welfare of employees makes good business sense.
Workplace incidents and accidents incur many costs for both the organisation and the injured person. The costs incurred are usually a combination of economic (payments for medical bills and lost time), human (emotional, pain and suffering), social (impacts of incidents on family, friends and work colleagues) and organizational (productivity, damaged plant or equipment and the decline of the organisation’s reputation). Repercussions of an unsafe work environment can be extremely costly.
Employers need to ensure that health and safety measures are always implemented and followed in the workplace to prevent injuries and illness.
In implementing safety measures, employers need to consider contributing factors for incidents. Some of the most common contributing factors are:
- faulty work practices
- poor housekeeping (not keeping the work area hazard free)
- poor plant and equipment maintenance
- inadequate training
- inadequate supervision
- stress and error of judgement (unrealistic deadlines, tiredness, rushing a job, boredom)
- miscellaneous conditions (weather – excessive heat or cold, workload – unrealistic/excessive, time – end of shift, graveyard shift, unrealistic timeframes)
The costs of workplace illness and injury
The cost of workplace illness and injury can be categorised into two main areas of either Direct and/or Indirect costs.
Direct costs are those costs that are directly attributable to the illness or accident. We have outlined these costs below:
- Salaries/hours worked: this is the actual salary payable for the hours per week that the injured party regularly worked prior to the accident occurring. This amount is payable to the injured party for a maximum total of 52 weeks. (The weeks will depend on the extent of the illness or injury and the time off from work that is required.)
- Actual number of productive hours: this is the actual salary payable for the hours worked prior to the accident occurring and after the accident when the injured party returns to work. Often injured employees return to work on light/restricted duties, which means that the employee cannot either complete a 40-hour week or the duties/tasks are restricted.
- Accident investigation: the investigation of an accident can either be conducted internally, externally by a Safety Agency, or a combination of both. The cost is a result of the time taken for the investigation. The investigation often entails the organisation and its employees involved in the accident or witness to it, to write a report on the accident or describe to the investigator what occurred. This can be a timely and costly exercise.
- First aid: involves the cost of training employees in First Aid and the purchase and maintenance of first aid equipment.
- Processing of employee’s compensation: there are several forms that need to be completed by several different parties when processing a employees compensation claim. This takes time and effort away from other work tasks.
- Medical costs: includes all medical bills and medication requirements pertaining to the workplace illness or injury.
- Rehabilitation of injured employee: rehabilitating employees can be a costly exercise but compared to paying wages for up to 52 weeks for no productivity it is seen as a much better option. Returning employees to work as soon as medically possible can often save the organisation money. Rehabilitation costs not only include the cost of rehabilitation treatment, but job re-training and employment assistance if the injured employee cannot return to his or her original place of work.
- Damage to property and equipment: damage to property and equipment can run into thousands of dollars. Apart from damage to expensive equipment, accidents can have far reaching consequences such as fires, electrical failures, explosions, etc.
- Third party liability: all organisations have a responsibility for all people on their property including customers, contractors, company representatives etc. If any of these people are injured on the organisation’s property, the injured individual can place a claim against the organisation under third party liability.
- Payments for settlement of injury or death claims: These types of payments can be costly to the organisation in both times spent in negotiations or in Court, over the payment amount and the payment amount itself.
- Increased insurance premiums: the organisation’s insurance premiums increase with every claim made for employees’ compensation.
- Compensation leave/sick leave: when an employee becomes injured at work and needs medical treatment and time off to recover from the injury, he or she is initially paid for the time off under sick leave. When all the processing of employee’s compensation forms has been completed the employee is reimbursed the sick leave entitlements and any continuing payments are paid under employee’s compensation guidelines.
- Legal costs: in some circumstances due to uncertainty over an incident or irregularities in an employee’s compensation claim, a disputed claim can result. This usually means that the claim is referred to the Courts for settlement.
- Industrial action: in the worst-case scenario if an incident is not handled appropriately and/or expediently employees can take industrial action. This action usually takes the form of not working in the area of the incident or with the equipment involved in the incident. This can have the effect of slowing down productivity and revenue for the organisation. This type of action can cost the organisation thousands of dollars.
Indirect costs are those costs which are an extension or repercussion of the direct costs of the illness or accident itself. We have outlined these costs below:
- Loss of productivity: loss of productivity can occur at two levels; by an inexperienced or low skilled employee replacing an injured experienced skilled employee and by other employees reducing their productivity levels due to uncertainty of safety conditions in the workplace.
- Loss of employee morale: employee morale can decrease in the advent of a workplace accident due to loss of faith in the management of the organisation. This is particularly the case when accidents happen too often and without the necessary corrective action being taken.
- Increase in absenteeism: this is usually the first sign of a disgruntled workforce. Increased absenteeism signifies that the employees are no longer committed to the organisation. They feel unsafe in the work environment.
- Increase in labour turnover: occurs when employees no longer want to work in an unsafe and unhealthy environment.
- Industrial disputes: industrial disputes are the “carry on effect” from industrial action when the action originally taken has not yielded a favourable result. Industrial disputes may be confined to one organisation/site or a chain of organisations/sites.
- Impaired public image: loss of a favourable public image can occur in several ways: by word of mouth via employees or customers who have experienced incidents within an establishment, through industry associations and affiliations and through media attention.
- Loss of revenue: high employee absenteeism and turnover rates and subsequent loss of productivity all point to loss of revenue. Finances are either geared to rebuilding the organisation’s workforce, or towards taking corrective action to prevent incidents occurring. In either case the funds are being directed away from producing and supplying goods and services. Externally to the organisation, customers, and suppliers etc may look at doing business with a different reputable organisation.
- Loss of business: loss of business may occur when productivity continues to decline, when customers and suppliers take their business elsewhere and when settlement of an employee’s compensation claim leaves an organisation unfinancial.
- Implementation of corrective action: often the implementation of corrective action can be costly, and it may need to be taken in a few sites as well as the site of the incident. It may include:
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- the training of key personnel or all employees,
- the installation of special equipment,
- an internal or external audit of safety policies and procedures,
- regular reporting to official bodies, and
- designing new Health & Safety policies and procedures.
If your organisation would like assistance in identifying contributing factors to incidents and with implementing health and safety measures to prevent injuries and illness, please contact us.
