7 Ways That Safety Performance Impacts Your Business
1. Injuries are expensive
According to OSHA, workplace injuries and illnesses have a major impact on an employer's bottom line. The Department of Labor estimated that employers pay almost $1 billion per week for direct workers' compensation costs alone. The costs of workplace injuries and illnesses include direct and indirect costs. Direct costs include workers' compensation payments, medical expenses, and expenses for legal services. Conversely, indirect costs include training replacement employees, accident investigation and implementation of corrective measures, lost productivity, repairs of damaged equipment and property, and costs associated with lower employee morale and absenteeism.
2. OSHA citations can impose significant penalties
OSHA issues a citation in approximately 80% of its inspections. Penalties for each violation could range from $7k (for a Serious violation) to $70k (for a Willful violation) depending on the specific circumstances. Although the average citation is around $10k for per inspection, the highest citation ever issued was $87M. Furthermore, OSHA has increased its commitment to referring cases to the Department of Justice for criminal prosecution when certain criteria are involved in a fatal accident.
3. Employee productivity and product quality may be impacted
Operations are lean with companies relying heavily on skilled employees to maximize quality and productivity. For example, when an accident sidelines an employee that has a unique or critical skillset for your operation, their duties will need to be performed by a coworker who may not have the experience or training to perform those tasks at the same level of efficiency or expertise. This creates a situation where some of the processes may not only slower but also introduces more rework which results in a lower production yield.
4. Customers are paying closer attention to their suppliers’ safety performance
Today’s customers/clients are increasingly demanding that their suppliers implement effective health and safety practices which are supported by a strong safety culture. Many companies are requesting and tracking important information about their suppliers in an effort to reduce their overall safety and health risks, including:
OSHA inspection history
Workers compensation performance
Certificates of insurance
OSHA recordable information
Written program in compliance with State and Federal regulations
In many industries, poor safety performance is a significant hindrance in obtaining new customers/clients or even maintaining their existing customer base. Companies with a sound safety culture simply do not want to be associated with "bad actors" that could tarnish their own reputation. A notable example includes the federal government where they are imposing significant expectations with regards to safety before a vendor may even be considered for a contract.
5. Safety culture makes risk reduction second nature
Companies have found that if safety and health values are not consistently shared at all levels of the organization, any perceived gains that result from declaring “safety is our #1 priority” are typically short-lived. Studies have shown that in companies where safety is not valued, employees do not feel the motivation to meet, let alone exceed, the performance measures expected from their work. Further, employees that do not feel their well-being is important to management will be more inclined to leave for another job opportunity (or competitor) even if it means taking a pay-cut. Another way to think about it is that a company’s poor safety performance and lack of a safety culture may actually be imposing higher labor costs by ether imposing what amounts to “hazard pay” for the front-line employees to keep them with the company.
6. Reduce workers comp premiums over time
All companies are required to maintain workers’ comp insurance for their employees. The insurance premium is based on their specific industry’s "modification experience factor" which encompasses the company’s frequency and size of insurance claims. A "mod-factor" greater than 1.0 means that the company's insurance premiums are greater than their peers and are, thus, at a financial competitive disadvantage. Conversely, those with a mod-factor less than 1.0 enjoy a cost advantage, not to mention productivity and quality advantages, in comparison to their competitors. It's not uncommon to see some companies with as much as a 20-30% lower workers’ comp premium cost compared to their industry peers, which gives them that much more of a competitive advantage.
7. No one wants to get hurt or see their friends get hurt
No one wants to get hurt while at work nor see one of their friends suffer serious injury or worse. The vast majority of employers take their responsibility of providing a safe workplace seriously because it's simply the right thing to do. However, some employers don't know what they don't know in terms of their workplace hazards - which is why it is important to conduct a robust and comprehensive compliance audit of the worksite. Identifying and remedying the hazards, coupled with employee awareness / training, are proven to be among the most effective ways to reduce the likelihood and severity of injuries and illnesses in the workplace.