Hard and Soft Costs

The initial costs of a claim are only the beginning

Like an iceberg, most of the costs of a workplace injury are hidden
Shadow under picture

The indirect costs of accidents are usually greater than the direct costs. A conservative estimate of losses indicates that for every $1 of direct accident costs, there are $3 of indirect costs. Some studies indicate these hidden costs can be 4 to 10 times the insured costs. Indirect costs to consider include:

  • Time lost from work by injured employee(s).
  • Loss in earning power.
  • Economic loss to injured worker’s family.
  • Lost time by fellow employees.
  • Loss of efficiency due to break-up of crew.
  • Lost time by supervision.
  • Cost of training a new worker.
  • Damage to tools, equipment, and other property.
  • Time lost for replacing damaged equipment.
  • Spoiled work.
  • Loss of production.
  • Spoilage - fire, water, chemical, explosives, etc.
  • Failure to fill orders.
  • Overhead cost (while work was disrupted).

Like an iceberg, the hidden costs of accidents are not visible on the surface, but are still present. Examples of such hidden costs:

  • Production loss/worker distraction
  • Training costs/replacement worker
  • Loss of skill/efficiency - slowed production
  • Paperwork
  • Administrative time
  • Loss of morale
  • Legal issues
  • Medical expenses
  • Wages
  • Equipment
  • Workers compensation premium

Just as there are many hidden costs due to accidents, there are hidden savings in accident prevention. For this reason, the phrase “loss control” is often used in safety management. Every accident you prevent saves direct and indirect accident costs - affecting your bottom line. Other benefits of accident prevention efforts include:

  • Safe, healthy employees.
  • Property and materials will not be damaged.
  • No disruption to production supervisors/managers can focus efforts on other projects.
  • Increased employee security at work.