The True Cost of Workplace Injuries: Calculating the Impact

According to the 2022 Liberty Mutual Workplace Safety Index, the most disabling, nonfatal workplace injuries cost $49.18 billion.

U.S. businesses spend more than one billion dollars a week on serious, nonfatal workplace injuries. This is a very large number and represents a huge cost to employers, but when you take into account indirect costs, that number dramatically increases.

21.76

Overexertion involving outside sources (handling object)

17.67

Falls on same level

9.76

Struck by object or equipment (being hit by objects)

8.73

Falls to lower level

6.91

Other exertions or bodily reactions (awkward postures)

6.18

Roadway incidents involving motorized land vehicles

4.34

Slip or trip without fall

3.77

Caught in or compressed by equipment or objects (running equipment or machines)

3.22

Struck again object or equipment (colliding with objects)

2.39

Non-roadway incidents involving motorized land vehicles.

So how are direct and indirect costs defined and how can you calculate the true cost of an injury and its effect on your organization?

Direct Costs

Direct Costs include the claim cost, administrative cost, excess premium and additional fees. These costs can be broken down into the following categories:

Medical

Hospital
Physicians
Pharmacy
Physical Therapy or at home nurse

Indemnity Payments

Disability compensation
Dependent benefits or death benefits
Settlements
Legal expenses including investigations

Program or Administrative Costs

Increase in premium
Claims administration expenses
Taxes assessments or other additional expenses

Indirect Costs

Indirect Costs are the additional effects injuries can have on your organization both financially and emotionally and include:

Loss of productivity or service standards
Additional supervision time and administrative costs
Labor and overtime costs
OSHA fines
Building or vehicle damage
Equipment damage
Recruiting, hiring and training replacement
Loss of business or goodwill
Emotional toll on other employees and increased risk for additional injuries or further claims

To calculate how the total costs (direct + indirect) of an injury affect profitability calculate how much money in sales your company must generate to make up for these losses.

First 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.

As you can see there are more than just the direct costs to consider when evaluating the true cost of an injury. Injuries affect multiple parts of the organization and a focus on safety should be shared across the board. Procurement, Safety, Finance, Legal and Operations must work together to develop a comprehensive strategy to reduce injuries in the workplace, limiting the number of claims and saving significant time and money.

When building this strategy you need more than a safety supplier, you need a safety partner. Someone who can provide a comprehensive program that combines the proper safety equipment, training, services, technology and safety expertise to reduce your injury rates.

Training & Consulting

Whatever your industry, Arbill is committed to helping your company ensure workplace safety. Our full suite of safety training and consulting options, including site assessments and audits, gap analysis, staff augmentation and industrial hygiene services are provided by highly experienced and certified EHS professionals.