Workplace Injury Compensation — The Hidden Costs

From an industry perspective, there's no escaping the rising costs of workplace injury compensation. Every injury on your jobs has a range of direct and indirect costs. According to the National Council on Compensation Insurance, Inc., indirect costs for workplace injuries range from 110 percent to 450 percent of direct costs.

Workplace injury compensation extends far beyond insurance premiums. Here's how it stacks up for injuries that don't result in disability or death. (If those things happen, the sky's the limit on the toll.)

Direct

Workers' Compensation

If you're a legitimate contractor and are playing by your state's rules, you're paying premiums for workers' compensation (WC) insurance. It's actually a pretty good deal because it covers medical and rehab costs for the injured and replaces some of their pay while they're recovering. Your premiums go up based on your "experience rating," a premium adjustment number that's affected by how many accidents you have.

Pain and Suffering

Workplace injuries are major sources of chronic pain. Construction's rate of musculoskeletal injuries is 16 percent higher than the average, and nearly 20 percent of Americans say they live with chronic pain. So look around you; there's probably someone working in pain. Pain and suffering increase absenteeism, accident risks and employee turnover. Moreover, they reduce efficiency and add to medical costs — as well as the cost of accommodating those who must work in pain.

Accident and Medical Response

This includes first aid, the lost time of people responding to the accident, and costs for care, services and devices that aren't covered by WC.

Indirect

Administrative

It costs you to process a WC claim because someone has to investigate what happened, create reports and work with the insurance company and other interested parties. You might also need to do reports to Occupational Safety and Health Administration (OSHA) or other safety authorities. Expect costs from third-party inspections and meetings that keep people from their work.

Overtime and Wages

These include wages you pay to the injured party for absences that WC doesn't cover. There's also the cost of lost-time wages from work stoppages because of the injury. If the absence of the injured person makes you short of help, and you don't add more employees to make up for the shortfall, you'll likely have overtime costs. If you do add employees, you'll absorb those costs as well.

The Employee

You'll have costs for reallocating people on your project schedules. You'll also have costs for hiring and training replacement employees, and for additional safety training. Employee productivity can suffer, and morale can decline, especially in cases where management is perceived as somewhat responsible for an accident. All in all, realigning resources to tasks will reduce production while introducing new costs.

Project Disruption

This includes disruptions in material supplies and damage to equipment resulting from the accident. You could easily face project downtime both immediately after the accident and in the days following it. When an accident involves materials, fixtures and tools, you will have replacement or repair costs for those. You'll have costs to play catch up on the work the injured employee was scheduled for and you'll have costs arising from subsequent mistakes in the work because others are not up to speed.

Fines and Penalties

If the injury happened because you didn't create a safe-enough environment, you will face fines from OSHA, and maybe from local authorities that oversee worker safety.

Serious injuries could unleash a barrage of other expenses such as legal fees, construction claims and higher WC premiums. Finally, your reputation could take a hit causing owners and project partners to lose confidence in your performance. The indirect costs for these issues might not become evident for months.

Prevention is the best defense. Here's where you can find a guide to lowering your risks. You might want to estimate your own workplace injury compensation costs, and you can do that right here.



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