When Something Bad Happens: Direct and Indirect Costs
Perhaps the threat of serious fines and possible jail time has started us thinking and spurred us to action, beginning with a thorough review of our environmental, health, and safety programs. It has been said many times and most would agree, money is the best change agent especially when it comes to safety standards and enforcement. But, this is not the strongest argument for compliance, in our humble opinion. We believe it pays to protect because of the far-reaching and devastating effects on individuals, family, and co-workers. What will be the fallout and subsequent direct and indirect costs? And, will these really be less than taking precautionary steps and having proper safety programs in place?
We all know that when someone is injured on the job it is going to cost us. But, in fact, the potential regulatory fines that we have discussed above may be one of the least amounts after everything is said and done. When we look at all the various costs associated with an occupational illness or injury we can separate them into two major categories: direct costs and indirect costs. Let’s take a closer look at each of these so we have a clear picture of everything involved.
Direct costs are the easier of the two to evaluate. Each item is a defined task with a known dollar amount attached. It begins with the initial trip to the emergency room. Costs quickly add up when the bills arrive from the physicians, the hospital, the diagnostic lab, and the pharmacy. All of these are repeated with each follow up visit and we add in independent medical exams, physical therapy, surgery, and other treatments. We have seen data from workers’ compensation cases where even minor injuries such as cuts or small chemical burns, two of the most common laboratory accidents, have costs that easily run into thousands of dollars. Step up the seriousness of the injury or add in a complication or two and we are into tens of thousands or much more.
Indirect costs are a little harder to fit numbers to and are those not directly tied to the injured employee but result from the repercussions of the injury and lost work time. Most are associated with internal or in-house management time. The laboratory manager and safety coordinator have to investigate the accident and the workers’ compensation claim and issue reports. The finance department and insurance coordinator have to track and pay bills, premiums, and deductibles and adjust the payroll. Other unit or mid-level managers will deal with staffing issues, claim reporting and monitoring, and other reporting as necessary. These hours add up and are usually significant.
The employee’s co-workers are also going to be affected. You can bet they will be watching closely how the injured employee is treated and how the company addresses the loss and disruption. Do not try to downplay or ignore the event. Involve all co-workers in the accident investigation; their insights are invaluable. Address corrective actions as quickly as possible whether they are safety issues, personal protective equipment, or additional training. The last thing we want is another accident or injury.