The National Safety Council estimates that employers lost a total of $171 billion in 2019 due to workplace injury costs, a cumulative figure that represents lost income, extra expenses, workers' compensation, and medical expenses. While some of these injuries were fatal, most were not and could have been prevented.
While the total number is striking enough, a deeper dive into the components of these large losses is even more enlightening. Companies may be surprised to see a breakdown of direct and indirect costs and the impact they have on overall profitability and loss.
direct costs of workplace injuries
Companies are most familiar with the direct costs of workplace injuries. Below are the estimated losses for each category according to the National Safety Council:
- Wage and productivity losses - $53.9 billion
- Medical expenses - $35.5 billion
- Administrative expenses - $59.7 billion
- Time lost by injured workers - $13.3 billion
- Losses to equipment or vehicles - $5 billion
- Fire losses - $3.7 billion
In addition to these totals, the average worker’s compensation claim in 2019 was $42,008, but actual costs can range greatly depending on your company’s Experience Modification Rate. The top three injuries for claims in 2019 were vehicle accidents, burns, and slips or falls, all of which are, potentially, preventable accidents.
indirect costs of workplace injuries
Indirect costs of workplace injuries are somewhat harder to calculate, and many factors will depend on your industry and organization. These costs may not show up immediately on a ledger, but they will eventually reveal themselves over time. Some examples include:
- Wages paid to idle workers after an injury occurs
- Recovery of lost production time after an injury occurs
- Additional human resource costs after an injury occurs
- OSHA fines and enforcement actions after an injury occurs
- Administrative time spent by staff reporting an injury
- Increases in workers compensation coverage
- Loss of job contracts
One study conducted by researchers from the Liberty Mutual Research Institute for Safety, Harvard University, and The University of Wisconsin-Oshkosh found that for every dollar spent on direct costs, about $2.12 would be spent on indirect costs—roughly a 2:1 ratio.
Another study focused on the construction industry found the ratio between direct and indirect costs to be 4:1 and as high as 17:1 in some cases. The type and size of the accident will contribute to this ratio, but it is clear that indirect costs outweigh direct costs overall.
It is worth noting that the study by the Liberty Mutual Research Institute cited above and two leading universities found that for every dollar spent on improving workplace safety, businesses gained $4.41.
lower workplace injury costs through safety training
Calculating all the elements of worker’s compensation losses makes it clear that workplace injuries can be costly, in monetary value, and in personnel. The impact on morale and other intangibles is incalculable but surely has a negative effect as well. According to a study by the National Institutes of Health, “Construction injuries only cost $11.5 billion, with $4 billion in fatalities (40%) and $7 billion in nonfatal injuries, primarily driven by cases with days away from work.”
The bottom line is that construction companies can effectively lower workplace injury costs by investing in safety training. A comprehensive program of periodic safety training for your company is an investment in the health and well-being of your business, as well as that of your workers.