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How to calculate the true cost of an injury

Julie Copeland

Posted by
CEO

cost of workplace injuries

In a recent post we talked about the high costs of workplace injuries for the employer. In fact, we quoted a study that found that workplace injuries and illnesses cost the nation $250 billion every year.  How are these costs calculated and how do they affect you the employer? 

Direct Costs

  • Medical Cost
    • Doctor’s visits, treatments, surgery, etc.
  • Indemnity Cost
    • 2/3 wages up to a set amount weekly
  • Medical
    • 100% of the medical – doctor, office visit/hospital, X-ray/MRI, prescription drugs, physical therapy, home nurse, etc.
  • Indemnity
    • Percentage of weekly wage (varies by state)
    • Permanent and partial disability
    • Death benefits
  • Expenses
    • Legal
    • Claim processing/handling charges

Indirect Costs

  • Pain and suffering of employee         
  •  Loss of production                                          
  • Customer “quality” issues & loss of business   
  •  Overtime costs
  • Equipment or product damage
  •  Recruiting and retraining
  • Time
  •  Damage to equipment
  • Interruptions in productivity
  •  Injured employee
  • Employee morale
  •  Customer service
   

Direct costs + Indirect costs = Total cost

To calculate how the total costs of injury affects profitability – calculate how much money in sales your company must generate to make up for these losses.

Calculate your company’s profit margin by dividing its total profits by total sales, and

Divide the total cost of an injury or illness by your company’s profit margin.  Using this formula a claim of $4,000 would require a company with a profit margin of 5 percent to sell $208,00 worth of product to make up for the losses.  A $100,000 claim would take $4.2 million in sales to make up the loss.

As you can see, there is so much more to workplace incident costs than just workers compensation.  Building a culture of safety in your organization is the best way to ensure the reduction of workplace injuries and the costs associated.  Arbill provides safety products and safety services – but more importantly – we protect lives. Contact your Arbill representative today to start protecting the lives of your employees.  Visit arbill.com for more information and click here to subscribe to our Safety Blog.

 

Topics: Arbill, culture of safety, reduce workplace injuries, keep your employees safe, cost of workplace injuries

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