Impact of Safety
Indirect Costs of Accidents
Indirect costs of injuries may be 20 times the direct costs – Indirect costs include: training and compensating replacement workers; repairing damaged property; accident investigation and implementation of corrective action; scheduling delays and lost productivity; administrative expense; low employee morale and increased absenteeism; poor customer and community relations.
Studies show that the ratio of indirect costs to direct costs varies widely, from a high of 20:1 to a low of 1:1. OSHA has shown that the lower the direct costs of an accident, the higher the ratio of indirect to direct costs (ranging from 4.1/1.0 to 1.1/1.0). Examples of indirect costs include training replacement employees, accident investigation and implementation of corrective measures, lost productivity, repairs of damaged equipment and property, and costs associated with lower employee morale and absenteeism.
In a recent poll of financial decision makers the participants perceived that the average estimated ratio of direct cost to indirect cost associated with occupational injuries was $2.12/$1.00.
Resource: ASSE (pdf)
Title: Case Study: Indirect Costs Associated with a Back Injury Incurred in a Manufacturing Facility
Publisher: ASSE Ergonomics Branch
Summary: The direct costs associated with an accident /injury are relatively simple to calculate, as these are the expenses paid for personnel receiving treatment as a result of an accident/injury. Most often, these costs are documented through bills paid directly by the employer and/or their insurer. However, indirect costs associated with the same accident/injury are often not as easily identified and calculated. Therefore, this case study is presented to outline a methodology to calculate the IDCs associated with accidents/injuries in the workplace.
Resource: ASSE (pdf)
Title: Occupational Safety and Health: Synergies between Security and Productivity (2006)
Publisher: International Labor Office – Committee on Employment and Social Policy
Summary: Discusses direct and indirect costs of occupational injuries, illnesses and fatalities and their relationship between company security and productivity.
Resource: ILO (pdf)
- Leadership and Occupational Safety and Health (OSH): An Expert Analysis
- OSHA: Workers' Compensation Costs of Falls in Construction
- OSHA White Paper: Injury & Illness Prevention Programs
- Economic Burden of Occupational Fatal Injuries to Civilian Workers in the U.S. Based on the Census of Fatal Occupational Injuries, 1992-2002