Direct and indirect costs of workplace accidents

Direct and indirect costs of workplace accidents

Accident is one thing that everyone tries to prevent either consciously or unconsciously as it comes with lots of negative impacts (Direct and indirect costs of workplace accidents) both on the short term and long term.

At the end of this article, you will understand the Direct and indirect costs of workplace accidents“.

When workplace injuries occur, it’s easy to see the immediate and direct costs, but there are a multitude of underlying and indirect costs that should also be taken into account. Indirect costs mostly covers the bigger picture than the direct costs.

However, preventing workplace injuries not only keep employees safe, it also prevents these potentially significant costs (Direct and indirect cost).

Read Also: 6 Tragic cost of accident you never considered (Direct cost)

Direct costs of workplace accidents

Direct cost are also referred to as insured costs. They are usually considered as those costs covered by workers compensation insurance and other minor medical costs for the accident. The company pays insurance to cover these costs.

Accidents have obvious, direct costs such as medical, hospital, and rehabilitation expenses, workers’ compensation payments, and higher insurance premiums or even loss of insurability.

For a self-insured employer, direct injury costs include:

  • Claim Cost – 80%
  • Administrative Cost -10%
  • Excess Premium -8%
  • Other – 2%

These direct costs can be broken down into the following categories:

Medical

  • Hospital
  • Physicians
  • Pharmacy
  • Physical Therapy

Indemnity Payments

  • Disability Compensation
  • Dependent Benefits
  • Death Benefits
  • Settlements
  • Legal Expenses
  • Investigations

Program Costs

  • Excess Premium
  • Claims Administration Expenses
  • Other (Surety, Assessments, Taxes, etc.)

Read Also: The fearsome hidden cost of accidents

Indirect costs of workplace accidents

Indirect costs are those costs that are not direct damage expenses, pre-funded loss allocations or losses covered by insurance.

This list gives examples of indirect or uninsured costs:

  • Lost production time.
  • Productive time lost by an injured employee.
  • Productive time lost by employees and supervisors helping the accident victim.
  • Cleanup and startup of operations interrupted by an accident.
  • Cost of continuing all or part of the employee’s wages, plus compensation.
  • Reduced morale among your employees, and perhaps lower efficiency.
  • Cost of completing paperwork generated by the accident.
  • Lost of Productivity or Service Standards
  • Additional Supervision Time and Administrative Costs
  • Temporary Labor and Overtime Costs
  • OSHA Fines
  • Building and/or Vehicle Damage
  • Equipment Damage
  • Product/Material Damage
  • Emergency Supplies
  • Interim Equipment Rentals
  • Accident Investigation Costs
  • Accommodations/Modifications Made for Injured or Potentially Disabled Worker
  • Recruiting, Hiring and Training Replacement Workers
  • Loss of Business and Goodwill

 

The aim of this article was to bring to your understanding the direct and indirect costs of workplace accidents; however, to avoid all the associated cost of accident, we should do everything possible to prevent accident.

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