Estimate how safety pays a company

OSHA's "$afety Pays" program is designed to help employers assess the impact of injuries and illnesses and profitability and find ways to mitigate those potential costs.
By Gregory Hale, ISSSource April 21, 2017

A company that thinks safety first will not only keep its employees safe, it can also add to the bottom line. The Occupational Safety and Health Administration’s (OSHA) "$afety Pays" program is designed to help companies who believe in that mantra. The program is designed to help employers assess the impact of occupational injuries and illnesses on profitability.

This program uses a company’s profit margin, the average costs of an injury or illness, and an indirect cost multiplier to project the amount of sales a company would need to cover those costs.The program is a tool to raise awareness of how occupational injuries and illnesses can impact a company’s profitability, not to provide a detailed analysis of a particular company’s occupational injury and illness costs.The "$afety Pays" program will:

  • Allow users to pick an injury type from a drop-down list or to enter their workers’ compensation costs
  • Prompt users for information to do the analysis, including their profit margin and number of injuries
  • Generate a report of the costs and the sales needed to cover those costs.

In the $afety First program they give an average claim cost estimates provided by National Council on Compensation Insurance, Inc. (NCCI). The data reflects the average cost of lost time workers’ compensation insurance claims derived from unit statistical reports submitted to NCCI for policy years 2011-2013.

NCCI makes no guarantees nor assumes any responsibility for the accuracy of or any results obtained through the use of the NCCI data provided through this tool.

NCCI manages the nation’s largest database of workers compensation insurance information. NCCI analyzes industry trends, prepares workers compensation insurance rate recommendations, determines the cost of proposed legislation, and provides a variety of services and tools to maintain a healthy workers compensation system.

The indirect cost estimates provided in this program come from the Business Roundtable publication, "Improving Construction Safety Performance," and are based on a study conducted by the Stanford University Department of Civil Engineering. The magnitude of indirect costs is inversely related to the seriousness of the injury. The less serious the injury the higher the ratio of indirect costs to direct costs. While they may account for the majority of the true costs of an accident, indirect costs are usually uninsured and therefore, unrecoverable. The indirect cost multipliers used in $afety Pays are general estimates based on the limited research on this issue. The indirect cost multiplier will vary depending on an employer’s circumstances.

Image courtesy: Bob Vavra, CFE MediaThese estimates include the following kinds of indirect costs:

  • Any wages paid to injured workers for absences not covered by workers’ compensation
  • The wage costs related to time lost through work stoppage associated with the worker injury
  • The overtime costs necessitated by the injury
  • Administrative time spent by supervisors, safety personnel, and clerical workers after an injury
  • Training costs for a replacement worker
  • Lost productivity related to work rescheduling, new employee learning curves, and accommodation of injured employees
  • Clean-up, repair, and replacement costs of damaged material, machinery, and property.

Some of the possible kinds of indirect costs not included in these estimates are:

  • The costs of OSHA fines and any associated legal action
  • Third-party liability and legal costs
  • Worker pain and suffering
  • Loss of goodwill from bad publicity.

Gregory Hale is the editor and founder of Industrial Safety and Security Source (ISSSource.com), a news and information Website covering safety and security issues in the manufacturing automation sector. This content originally appeared on ISSSource.com. ISSSource is a CFE Media content partner. Edited by Chris Vavra, CFE Media, cvavra@cfemedia.com.

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