What are the Indirect Costs of Workplace Injuries?

Workplace injuries – common among frontline workers – are costly to employers and employees alike. 

It’s estimated that U.S. employers pay over $1 billion per week just for direct workers’ compensation costs. These include upfront costs such as workers’ comp payments, medical expenses and legal services. Employees pay the price too as an injury can lead to lost wages and medical bills not covered by insurance. 

But the expenses don’t end here. The indirect costs of workplace injuries are estimated to be up to 20x that of the direct costs. These include long-term, uninsured expenses that come right from a company’s bottom line, including lost productivity, fines and increased insurance premiums.

For employees, indirect costs may include an impact on the ability to earn as well as physical and mental pain and suffering.

The National Safety Council estimates the total cost of work-related injuries in 2020 was $163.9 billion, including wage and productivity losses, medical expenses, administrative losses and many more indirect expenses.

So what are the hidden, indirect costs of employee injuries?

Here are 3 significant ones for employers to consider: 

1. Work Disruptions and Stoppage

When a worker is injured on the job it can be disruptive to normal workplace procedures, diverting attention and time away from work for multiple employees. Initially, other workers may stop working to assist the injured employee. Supervisors, HR and safety personnel will need to assess the injured worker’s condition as well as the affected area. 

Time may also be spent seeking medical attention, as well as investigating and reporting on what happened, filing a workers’ comp claim and completing necessary documentation. After an injury, attention may need to go to reworking schedules, hiring and training additional help, and implementing any necessary corrective actions in the workplace. The wage costs of this time lost through work disruptions and stoppage are all factored into the expense of an injury.

2. Loss of Productivity and Profitability

Lost workdays are one of the largest contributors to indirect costs related to workplace injuries. When an employee can’t stay on the job and be productive due to an injury, it lessens the entire company’s productivity and profitability. 

Employers may have to accept lower production volumes or quality. Alternatively, they can work to change schedules to cover the absent employee or hire and retrain a temporary replacement. Both are costly as existing workers doing additional responsibilities may require overtime pay, and new workers have lower productivity levels. 

Sometimes, an injured worker may be able to stay on the job but require accommodations for physical limitations, which can also potentially impact productivity and, ultimately, profitability. 

3. Increase in Workers’ Comp Premiums

Workers’ compensation premiums are based on a business’s safety score, or experience modification factor. The cost of the company’s claims over the past three years are compared to similar businesses – fewer claims and lower costs equate to a lower premium, while more claims and higher costs lead to higher premiums. Therefore, each workplace injury impacts future costs the business will incur.

Other indirect costs of workplace injuries to consider

  • Additional Human Resources

This includes costs associated with additional resources such as legal counsel, third-party consultants and independent medical examiners. 

  • OSHA Fines and Enforcement Actions

Some injuries require an OSHA investigation which can lead to expenses related to fines and penalties, legal and consultant fees, and administrative time.

  • Property Losses and Repairs to Equipment 

Costs may be incurred around workplace clean-up and the repair or replacement of damaged equipment and/or property.

  • Decreased Employee Morale 

An injured worker can cause workforce morale to decline, leading to operational inefficiencies and lost productivity that impacts a company’s profitability. 

  • Damage to Reputation

Damage to a company’s image after a workplace injury can cause the business to lose potential and existing customers, investors and strategic partners. 

Avoid and Reduce Costs by Preventing Workplace Injuries

While this list only covers some of the indirect costs a business may incur around workplace injuries, it’s clear the impact on the bottom line and worker well-being extends well beyond injury-related direct costs. It’s also clear that the best way to avoid these expenses is to prevent injuries from happening in the first place.

A solid workplace safety program and a culture of safety are key to reducing and avoiding costly employee injuries. Successful safety programs typically include regular inspections, proper protective equipment, safety training, workplace signage, personnel hours dedicated to safety and employee engagement measures.  

Tech-driven safety solutions, like wearables, have also been proven effective in reducing workplace injury frequency and are being included for free in innovative workers’ compensation programs to enhance loss prevention. Wearable tech is verified to cut injury rates in half, reduce lost work days and save employers on workers’ compensation claims costs. 

Preventing injuries before they occur is the best way to reduce employers’ direct and indirect costs of risk and to keep employees safe and productive on the job.