How Safety Management Affects Profitability

safety management system

One of the most factors that keep businesses in the black in expense control. When an employee gets injured on the job, the company or business ends up paying considerable amount of money for unplanned expenses, which can in some cases lead to affecting its ability to perform and survive.  A recent Canadian study found that small businesses with high injury rates fail sooner than those with better safety records. That’s why a safety management system is usually conidered an effective cost-control tool to keep risk to a minimum, and maintain profitability.

Increased Insurance Premiums

Safety regulations in most states make workers compensation insurance mandatory for employers with at least one employee who’s not the owner. And even though such insurance covers the employees medical expenses, rehabilitation and a portion of wages lost due to any work-related accidents, businesses will have to buy it with premiums tied to their safety history, i.e. the more workplace injuries, the higher the premiums. They also often pay for uncovered medical expenses out of pocket. Safe Work Australia estimates that direct workers’ compensation expenses costs AU employers nearly $6.5 billion each year.

Indirect Costs of Workplace Accidents

Direct safety costs such as workers’ compensation and medical bills pale when compared to the indirect costs a business pays after an on-the-job accident. According to the American Society of Safety Engineers, businesses pay more than $2 in indirect expenses for every dollar paid for direct costs. The biggest category of indirect expense relates to payroll. A workplace accident may mean hiring and training a replacement, paying overtime and paying any wages and benefits workers’ compensation doesn’t cover. Increased payroll costs can add up quickly: The U.S. Bureau of Labor Statistics reports absences last a median of eight days. Management and staff time diverted to accident-related administration tasks also adds to indirect compensation expense.

The Cost of Downtime

And if direct and indirect costs of workplace injuries are not enough, businesses also have to account for the cost of downtime due to workplace accidents. When an accident happens, work has to be stopped immediately, the accident must be investigated, corrections need to be made immediately, and any damaged property or equipment must be repaired and supplies or raw materials replaced before work can resume. The resulting drop in productivity can cause delivery and scheduling delays that damage customer relations or sales — additional indirect costs that impact profits. Worker distraction may hinder your team’s ability to achieve normal production levels quickly, as can accommodating the injured worker upon return.

The Indirect Benefits Of a Safe Workplace

Safety management offers profitability-guarding benefits. Don O’Neal, safety manager at a 116-employee business in Florida, told the Jacksonville Business Journal in a 2010 article that his safety program raised employee morale and made them more productive. Clients may require evidence of safety training and workers’ compensation coverage in their contracts. According to OSHA, businesses with the reputation for being safety-conscious business earn “better places to work” ratings that make attracting job candidates easier and reduce recruitment costs. Finally, putting safety first enhances a business’s standing in the community and generates positive publicity, factors that contribute to customer confidence.