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Safety In A Bad Economy: The High Cost Of Cutting Safety Corners

Julie Copeland

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CEO

workplace safety, safety costs, cost of safety, cost of workplace injury, OSHAWelcome back to this week’s Arbill blog series “Safety In A Bad Economy.” We hope you found Monday’s topic, “The Realities Of Reducing Staff And Resources,” helpful and informative.

In that post, we shined light on how certain cutbacks -- like layoffs and funds for new machine parts -- negatively impact workplace safety. This time around, we’re going to explore the adverse financial outcomes of cutting safety corners.

Companies everywhere have suffered the effects of the economic downturn so the need to shave costs without compromising productivity is on everyone’s mind. What else can you do? You reach for your imaginary budgeting scissors and go about carving into aspects of your business that aren’t perceived to be totally necessary so you can afford the things you need to deliver your products or services.

But, an investment in the cost of safety has less of a financial impact on your business than the cost of workplace injury.

Workers’ Compensation Has Got You Covered, Right?

Not quite! Actually, not even close.

You might be inclined to not worry about accident costs because you have workers’ compensation insurance. The problem is insurance only covers a portion of the total cost of a workplace accident -- employee medical expenses and partial wages. The remaining, indirect, costs include a whole host of possible expenses, including but not limited to:

  • Cost of the employee being away from a project or the facility
  • Lost production time
  • Investigation costs
  • Wage of a less experienced employee plus the cost of extra training
  • Damage to equipment
  • Additional overtime to fix equipment

The Better Business Bureau of Greater Maryland likened these indirect costs to that of an iceberg, stating:

“In the case of most icebergs, only one-eighth of the mass is exposed. In the case of a workplace injury, however, as little as one-tenth of the ultimate cost may be apparent, leaving nine-tenths of it hidden and with potentially disastrous effects on the business.”

Another area where you could take a financial hit is in your workers’ compensation insurance premiums -- they will most likely go up after an accident.

An Accident Doesn’t Even Have To Happen To Incur Safety Expenses! 

That’s right. Your business could be 100% accident free and still get penalized. 

The Occupational Safety & Health Administration (OSHA) takes their job of overseeing workplace safety seriously, and their safety violations come with hefty fines. Last year around this time, OSHA hit chocolate manufacturer Hershey’s with fines totaling $283,000 for health and safety violations that included failure to report workplace injuries.

In a typical year, OSHA issues more than 40,000 citations like these. Here are some of the most common areas of violation:

  • Fall Protection
  • Scaffolding
  • Hazard Communication
  • Respiratory Protection
  • Electrical/Wiring Methods
  • Ladders

It’s also worth noting that payment of an OSHA fine cannot be counted as an expense on your company books -- it’s a penalty and not tax deductible. 

One More Word About Machine Maintenance…

As we said in our last blog post, malfunctioning equipment could easily injure someone and postpone production while turning customers towards your competitors. To that effect, when malfunctioning equipment isn’t cared for properly, the costs associated with an unplanned breakdown are higher than preventative measures. If you wait until a machine breaks down, you pay for lost production, higher parts cost, overtime and collateral damage.

Generally, corrective maintenance costs two to five times more than preventative maintenance. Should a machine break down for good, the cost of a replacement is usually significant.

Cutting back on the costs of workplace safety initiatives and maintenance is a high-stakes gamble with diminishing returns. Overlooking prevention for quick fixes sets you up for potential disasters large enough to put an already struggling small to medium-sized company out of business.

Stay tuned for the final installment of “Safety In A Bad Economy,” where we’ll examine the positive results of investing in workplace safety.

Ready to learn more about making your workplace both safe and financially sound? Call 800-523-5367 or click on the button below to speak with a safety specialist at Arbill.

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Topics: workplace safety, OSHA, safety costs, cost of safety, cost of workplace injury

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