Overall Costs of a Major Accident on the Bottom Line

Businesses spend over one billion dollars a week on workers compensation insurance according to the Occupational Health and Safety Administration. The laws and social culture of a modern society punish any entity for adverse practices that result in unsafe environments for employees. The climate of the business culture has promoted agendas that reward organizations that prevent employee incidents in the form of accidents and injuries. The focus of companies on safety as a component of their operating structure has a tremendous impact on the bottom line, both in terms of direct expenses as well as in terms of lost productivity.
The costs of a business to operate are a variable in the calculation for how much they must sell their products for in order to compete. Anything that a company must spend money on in order to operate has an impact on how much the consumer must spend on the product and service — so this really has an impact on the enitre supply and demand equation. Worker’s compensation is typically thought of as a fixed cost that can be projected and spread out over the year in the form of installments. Depending on the industry and the actual risks involved, as well as the safety history and culture of a given organization, the costs can be remarkably different from one business to another. Industries with a lot of heavy machinery will feel this impact more than your average service industry job, for example.
When starting a new business, the actuaries will substitute a company’s lack of history with preset variables common to their industry. The insurance is, by design, a preventative measure to an accident’s destructive reach into the lives and coffers of those involved.
Insurance is an absolute necessity for the business — just as important as it is to an injured worker. If these kinds of incidents were not a present reality, there would be no need for insurance. The purpose of insurance is to mitigate these very real operating costs. If a company does not have the profitability to pay the medical bills and associated costs of an employee involved in a work related accident, then the employee will suffer harm and be in a position that will not allow them to take care of their families, not to even mention the responsibilities of their position. In the instances where negligence is involved courts can award millions of dollars in damages and shut down corporations. Accidents and insufficient safety culture can take bottom lines and destroy them.
The moment an accident happens the entire work area can become a disaster zone. An accident can become an incident of epic proportions almost instantaneously. If the employees who are present in the event of an accident are not trained to respond properly the accident can become more than an accident. When employees pull out a cell phone and record the events for immediate upload to the internet the company can find itself on the evening news. As bad as this is, it can be one of the smallest problems. If the accident is a result of employees operating in ways inconsistent with company policies, the events can appear as if the organization is deserving of greater scrutiny. Compliance with regulatory bodies is critical, and when employees operate in their own protocols they open up the company to burdensome oversight, if not outright fines or other costs.
Oversight of this nature takes up time and increases the tensions of everyone within the workplace as the microscope comes out and everyone is open to inspection. If the accident is a result of bad policy, the oversight can result in companywide changes. Changes that come from the outside in this way, while achieving the critical goal of safer work environments, can often time result in lower productivity than the establishment of a safety culture and compliance apparatus from within. Companies like eCompliance Management Solutions exist just for this reason — to implement systems of training and accountability to ensure a productive culture of workplace safety.
The money lost through labor and damages can be difficult to calculate. Every state has its own laws and every accident has its own variables. While some states may limit the amount of damages that an individual can be awarded, other states do not. If an accident or illness is experienced by a class of people, such as coal mine workers or asbestos producers, the damages can be legion. In cases such as these where the health of so many individuals is affected, the costs can amount to billions. Recently, an automobile manufacturer in America made headlines in the worst possible fashion, by producing a car that would shut off while driving down the road if the keys in the ignition weighed too much. The keys would fall out and cause accidents when drivers suddenly lost steering and control. The fines issued by the government and the awards to victims gave the “bottom line” a whole new meaning as profits disappeared and stocks dropped.
There is no substitute for good planning that incorporates thoughtful strategy in the areas of health and safety. Acting with wisdom in these areas will preserve your margins and maintain the stability of your organization. The awards for incidents do not have to be in the billions to shut a company down. In many cases, a single incident can shut you down.
Without invested care, everything earned can be lost.