For some, the thought of Occupational Health & Safety (OH&S) causes their eyes to glaze over and their mind to wander. We know it’s not the most riveting topic, but if you could save your company money, improve productivity and increase employee morale, would you? Workplaces that establish health & safety management systems can reduce their injury and illness costs by 20 to 40 percent. Safe environments also improve employee morale, which positively impacts productivity and service.
In today’s business environment, these safety-related costs can be the difference between reporting a profit or a loss. As a province, we’re improving steadily. Stop-work orders have decreased from 1081 in 2013 to 495 in 2017 – a reduction of over 50% – and accidents have decreased from 160 in 2014 to 96 in 2017 – but there is still room for improvement.
Measuring the Cost of Safety
Demonstrating the value of safety to management is often a challenge because the return on investment (ROI) can be cumbersome to measure. Your goal in measuring safety is to balance your investment against the return expected. Where do you begin?
There are many different approaches to measuring the cost of safety, and the way you do so depends on your goal. Defining your goal helps you to determine what costs to track and how complex your tracking will be.
For example, you may want to capture certain data simply to determine what costs to build into the price of a product or service, or you may want to track your company’s total cost of safety to show increased profitability, which would include more specific data collection like safety wages and benefits, operational costs and insurance costs.
Since measuring can be time-consuming, general cost formulas are available. A Stanford study conducted by Levitt and Samuelson places safety costs at 2.5 percent of overall costs, and a study published by the Economist Intelligence Unit (EIU) estimates general safety costs at about 8 percent of payroll.
If it is important for your organization to measure safety as it relates to profitability, more accurate tracking should be done. For measuring data, safety costs can be divided into two categories:
- Direct (hard) costs, which include:
• Safety wages
• Operational costs
• Insurance premiums and/or attorney’s fees
• Accidents and incidents
• Fines and/or penalties
- Indirect (soft) costs, which go beyond those recorded on paper, such as:
• Accident investigation
• Repairing damaged property
• Administrative expenses
• Worker stress in the aftermath of an accident, resulting in lost productivity, low employee morale and increased absenteeism
• Training and compensating replacement workers
• Poor reputation, which translates to lost business share and difficulty attracting skilled workers
Don’t jeopardize your business. We can help put an effective Occupational Health & Safety and Risk Management plan together for you. Don’t be another statistic – let’s chat today.