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The surprising hidden costs of Australian workplace and work related injuries

Posted by Pia Abrahams on

Unintended and unexpected costs of workplace injuries can quickly escalate

 

Workplace injuries happen in a split second.

Whether the outcome is a tragic fatality or a minor wound, it’s important to realise that when anyone gets hurt or killed in a workplace, expenses suddenly begin to mount and the cost of doing business is also impacted.

The direct costs are well known. It’s not that difficult for health and safety managers to calculate the financial impact of a fatal or non-fatal injury on workers’ compensation rates, workplace insurance premiums and related programs. But these costs cover only a fraction of the total cost of workplace injury, illness and death.

The indirect costs of workplace injuries are often not fully considered. Even when indirect costs are understood, the expense is often underestimated.

For every dollar spent on direct costs associated with workplace injury and illness, there are up to seven dollars in indirect costs.

Safe Work Australia estimated the total economic costs of workplace injuries for the 2012–13 financial year was $61.8 billion, representing 4.1 per cent of GDP for the same period.

Indirect costs can include lost productivity, equipment and property damage, investigation costs, fines and penalties, and reputational damage. The level of costs varies according to the severity of the workplace injury or illness.

Workplace injuries, illnesses and deaths impose real and significant costs on employers, workers and the community.

The real costs of workplace injury go far beyond the expense of medical, insurance and wage-replacement.

Understanding the magnitude of indirect costs promotes greater workplace health and safety (WHS) awareness. Any person conducting a business or undertaking (PCBU) wants to protect its employees because it’s the responsible - and law-abiding - way to operate. But when business executives realise how significantly workplace injury can adversely effect profit, they begin to understand the financial benefits of instilling sound health and safety programs.

When the real costs to the business are considered, there’s both an ethical and business case for investing in making work a safer place.

 

Indirect costs of workplace injuries

1. Workplace disruption

2. Equipment damage

3. Lost productivity

4. Management time

5. Workplace investigations

6. Liability issues

7. Reduced productivity

8. Increased injury risk

9. Damaged reputation

10. Human costs

11. Costs of workplace injury and illness by industry

12. Costs of workplace injury and illness by occupation

13. Costs of workplace injury and illness by type

Conclusion

References

 

1. Workplace disruption

Workplace injuries involve work stoppages that can cut into hours and even days of employee productivity.

Workplace stoppages can affect a few people or an entire company. Despite how many people are affected, such disruptions add significant delays and costs, including:

• Wages of injured worker or workers

• Wages of first aider

• Wages of affected workers

• Cost of ambulance or transportation to hospital or home

• Cost of first aid equipment and supplies

• Cost of evacuating site

• Cost of cleaning site

• Cost of making site safe

 

2. Equipment damage

Workplaces and equipment are commonly damaged by accidents.

The cost to repair or replace property can be an enormous expense. Property damage claims can be difficult to manage without expensive legal representation, such as:

• Wages of executives

• Cost of assessing damage

• Cost of determining equipment repairs, parts, upgrades or replacements

• Cost of labour for equipment repairs

• Cost of coordinating equipment purchases

• Cost of testing equipment repairs, parts, upgrades or replacements

• Cost of contractors and materials

 

3. Lost productivity

When a worker is injured, their role in the business must be filled. Someone who knows how to do the job can move into that position, but that then reduces their capacity to work in other areas. Someone may be hired to temporarily fill the void, or the injured worker’s job may be left undone until they are able to return.

Even worse, the injured worker may contribute vital skills or knowledge to the business that can’t be replaced. A worker with specialised experience running a highly technical machine can’t be easily duplicated.

Lost productivity costs include:

• Wages of injured worker or workers

• Wages of first aider

• Wages of affected workers

• Wages of temporary replacement worker

• Cost of ceasing production

 

4. Management time

A workplace injury, illness or death will require involvement with regulatory agents and even the police.

Complicated paperwork, incident reports and administration must be attended to. A supervisor may need to step in to help fulfil the injured employee’s responsibilities, reducing their effectiveness in managing day-to-day operations and productivity.

The costs of managing the administrative follow-up of a workplace injury include: 

• Wages of executives

• Wages of administrative staff

• Cost of follow-up meetings

 

5. Workplace investigations

Depending on the workplace injury or illness, WHS authorities and regulatory agencies may conduct their own investigations. Companies will be required to assist as well as perform an internal accident investigation that will require costly resources and labour.

Added to these costs may be litigation and specialist legal representation, incurring:

• Wages of executives

• Wages of administration staff

• Cost of assisting WHS authority

• Cost of litigation fees

• Cost of specialist legal fees

• Cost of interviewing injured worker or workers

• Cost of interviewing witnesses

• Cost of examining equipment

• Cost of photographing site

 

6. Liability issues

Workplace injuries due to non-compliance with safety regulations can result in major fines and even imprisonment of the PCBU or another criminally negligent worker.

Injuries and illnesses can also expose companies to legal action from the injured worker, the worker’s family, or anyone else negatively impacted by the accident, costing the business:

• Wages of executives

• Wages of administration staff

• Cost of specialist legal fees

• Cost of fines or other legal penalty

 

7. Reduced productivity

When a worker is injured, co-workers may be emotionally affected, even depressed. Low morale isn’t conducive to productivity, and normal workflow can easily dip.

Some workers may be worried that the cause of the injury hasn’t been mitigated, and may even cause another dangerous incident, or injury to themselves. This fear can slow down workflow and efficiency, resulting in reduced productivity and cost such as:

• Wages of executives

• Wages of administration staff

• Cost of advertising, interviewing and hiring replacement worker or workers

• Cost of training replacement worker or workers

• Wages of replacement worker or workers

• Wages of supervisor for replacement worker or workers

• Cost of contractors or subcontractors

• Cost of less efficient production

• Cost of potential quality defects

 

8. Increased injury risk

The risk of injury can increase if employees are required to work extra hours to make up for an injured worker, leading to mental and physical fatigue.

If workers are forced to rush tasks because of an injured worker’s absence, they can also be exposed to extra risk, costing:

• Wages of executives

• Wages of administration staff

• Wages of workers

 

9. Damaged reputation

Workplace accidents that cause major property damage, community risk and fatalities will likely be reported to the public via media news services.

Companies are defined by their reputation. Bad publicity can lead customers and potential customers to think poorly of a business and jeopardise sales, resulting in:

• Cost of potential lost sales

• Cost of brand damage

• Loss of customers

• Loss of staff

 

10. Human costs

Damage from a workplace injury doesn’t stop at work. Depending on the severity of the injury, the emotional toll on the employee and his or her family can be devastating.

Ask any individual or family that has experienced a workplace accident, and they’ll likely agree there’s a very measurable financial side to the physical pain.

 

11. Costs of workplace injury and illness by industry

Costs between industries are similar to the number of incidents.

Health care and social assistance, manufacturing, and construction account for nearly 40 per cent of total costs.

Cost of work-related injury and illness by Australian industry and workplaceSource: Safe Work Australia

 

12. Costs of workplace injury and illness by occupation

Managers and professionals have the highest unit cost.

Technicians and trades workers, labourers, and machinery operators and drivers, while comprising 31 per cent of the workforce, contribute 58 per cent of total cases and 57 per cent of total costs.

 

Cost of work-related injury and illness in Australian workplaces by occupationSource: Safe Work Australia

 

13. Costs of workplace injury and illness by type

Musculoskeletal disorders account for 17 per cent of all workplace injuries and 11 per cent of total costs.

Wounds, lacerations and amputations, and joint, ligament and muscle injuries together account for 57 per cent of all cases, but only 28 per cent of costs.

 

Cost of work-related injury or illness in Australian workplaces by injury or illnessSource: Safe Work Australia

 

Conclusion

The surprising costs of workplace injuries cover a multitude of indirect expenses.

These often-overlooked costs included workplace disruption, equipment damage, lost productivity and more.

Providing immediate and effective first aid to workers or others who have been injured or become ill at the workplace may reduce the severity of the injury or illness. In some cases, it can mean the difference between life and death.

Businesses, workers and others at the workplace have duties under WHS laws to take reasonable care for health and safety at their workplace.

A person can have more than one duty and more than one person can have the same duty at the same time.

Early consultation and identification of risks can allow for more options to eliminate or minimise risks and reduce the associated costs.

Investing in making work a safer place, works for everyone.

 

References

“The Cost of Work-related Injury and Illness for Australian Employers, Workers and the Community,” Safe Work Australia

“Injury Cost Calculator,” Worksafe Queensland

“First Aid in the Workplace: Code of Practice,” Safe Work Australia