By Neville, Haig
Industrial Management , Vol. 40, No. 1
The indirect costs of industrial accidentswhich take into account the sometimes immeasurable costs of lost production and efficiency on a company-wide basis-can be several times the costs of calculable workers' compensation and employee disability payments. These costs, however, are unnecessary. A recently released study notes that about 85 percent of all workplace injuries and fatalities can be avoided by making sure employees have been properly trained for their jobs-by introducing and requiring all employees to adhere to safe workplace practices, and by getting managers as well as the rank-andfile to make a genuine commitment to worker safety.
The accident took place in an instant. The worker received prompt first-aid attention and the injury was treated. The after-effects of the accident, however, transpired more slowly. Workers who witnessed the scene were too shaken up to resume their duties. Production stopped until the damaged equipment was cleared and replaced with new machinery. Managers reassigned the injured worker, called in a replacement, and explained the duties. The supervisor filled out a lengthy accident report and several regulatory forms. The plant owner prepared for possible litigation. What are the cost implications of these interrelated events?
In most cases, such accidents and the accompanying loss of production and efficiency can be avoided by establishing manager/employee safety committees, instituting regular training programs and inspections, conducting emergency drills, and other steps. Certainly the most quantifiable benefit resulting from the successful introduction of a safety program is a reduction in casualty and workers' compensation insurance rates. Less measurable benefits, however, involve the avoidance of the indirect costs of an accident.
The indirect costs of an accident take into effect the sometimes immeasurable costs of lost production and efficiency on a company-wide basis. They include the following costs:
Wages for lost time of uninjured co-workers. Workers adjacent to the accident scene who stop their work to watch or offer assistance or talk about the accident need to be considered when assessing the financial impact of an accident.
Repair or replacement of damaged material or equipment.
This includes the time to order, deliver, and test the new machine following the accident.
Training replacement workers. Recruiting and training temporary or permanent workersand all the costs incurred by administrative personnelneed to be considered.
Overtime. Extra costs of employee overtime to make up lost production frequently occur after a workplace accident.
Other indirect costs of an accident also result in loss of productivity including the following:
Foreman's diverted activity. Supervisory wages for time attending to the accident must be assigned to the total costs of the accident.
Wages spent on reduced production. The cost of wages for an injured worker's return to a job could also be a factor, if the worker's performance decreases.
Clerical supervision and accident investigation. Filing accident and investigation reports to insurance company and regulatory agencies, and the expense of accident investigation and recommendations for preventive measures, are to be considered.
Remedial and compliance costs for equipment safeguards.
Following the event, response to regulatory hearings and equipment modifications for compliance can be costly, including special safety training, procedures, and monitoring of results as directly related to the accident.
Cost of criminal negligence
There is a potential cost experienced by high-level executives who might be found guilty of violating workplace safety regulations. Consider the outcome of the tragic 1991 fire at Imperial Food Products' poultry processing plant near Charlotte, North Carolina. …