In today’s tight economy more and more business owners and managers are looking for ways to reduce cost and improve the bottom line. Unfortunately, in many cases these business owners and manager never really consider safety as a profit center and major cost containment program. Either way, it has a direct bearing on the bottom line.

Let’s use as an example an employee receives a cut to the hand while using a knife. The medical bills are $495 paid for by your workers compensation insurance, this is the only reportable injury your company had all year and you have a profit margin of 12%. Now let’s take a look at what the total cost are for that injury plus the additional service or products your company has to sell for the year to recover the cost.

1. Injury (Direct) – $495.00
2. Indirect (Uninsured) Cost – $2,337.00
3. Total Combined Direct & Indirect Cost – $2,722.00
4. Additional Sales Required to Cover Indirect Cost – $18,562.00
5. Total Sales Required to Cover Injury – $22,683.00

Total Cost of Injury

  • Some of the direct and indirect (uninsured) cost associated with accidents are:
  • Workers compensation insurance cost
  • Legal fees
  • Emergency response cost
  • Medical bills
  • Time and material to repair damaged equipment and property
  • Lost production and reduced product quality
  • Reduced employee morale
  • Reduced company competitiveness
  • Training substitute (temp) employees
  • Time spent by managers during the accident investigation

All administrative work associated with the accident

Thanks to the National Council on Compensation Insurance (NCCI) for developing the interactive software program so employers can check the real cost of accidents for their company. This interactive software can be found on the OSHA web site and is free to use online. NOTE: This is based on national averages; your actual cost may vary.

To check your accident cost, go to www.osha.gov and in the upper right hand corner click on e-tools. Scroll down to Safety Pay’s, click on the link and follow the directions. You do not have to put your company name or anything of that nature. This is a tool for estimating what your cost of an individual accident or all of the accidents your employee had during the year.

So, if your company has an unusually high number or workers compensation claims, lost time accidents, your e-mod is above one point zero and your DART rate (from the OSHA 300 log) exceeds the average for your industry, maybe it’s time to start paying yourself and implement a comprehensive safety program. The lack of a comprehensive safety program cost a great deal more then you may realize.

In a recent quarterly newsletter published by ADOHS (Arizona Department of Occupational Health and Safety) OSHA estimates that for every dollar invested in a comprehensive safety program, a company can expect a return on investment of up to four dollars. A four to one return on investment is a pretty good deal for any company and their employees.


If you have questions or would like more information about the topics discussed in this article, please contact our HR Department by clicking here. Please be sure to reference the title of the article in your inquiry.

This article was sponsored by National PEO, LLC. National PEO is a leading provider of PEO services to hundreds of companies all over the US. Let us handle the burden of Payroll Services, Benefits Administration, Worker’s Comp, and Human Resources for your company. Contact us today to request a quote!

Reproductions of this article must include a link to https://nationalpeo.com.