A well-designed physical ability test (PAT) program can be a very effective risk management tool for businesses today. This is especially true of companies that operate within physically demanding fields – health care, construction, housekeeping or manufacturing, for instance – that tend to have higher than average worker injury rates, greatly increasing the cost of doing business. If you are considering investing in a PAT program for your company, one of the most important factors in making a final decision is ensuring the cost-effectiveness of the effort.
Determining whether implementing a physical ability test program will be cost-effective for your company begins with an accurate appraisal of the impact of workplace injuries on your bottom line.
Step 1: Determine Total Injury Costs
The first step is to determine the average annual incurred costs of musculoskeletal strains and sprains and slips, trips and falls over the last 1-3 years. Once you have a total for the direct injury-related costs you have paid out over the past year or two, that total can be used to calculate the indirect costs associated with injuries during that time period.
Indirect costs may include:
- Lost productivity
- Training replacement employees
- Repairs to damaged equipment or property
- Accident investigation and implementation of corrective measures
- Administrative time
- Reduced workplace morale
- Management of legal issues and regulatory actions related to on-the-job injuries
According to OSHA, the indirect costs of workplace injuries range between 1.1 and 4.5 times the direct costs. Given that wide range, using an indirect cost multiplier of 3x offers a reasonable means of estimating the indirect costs sustained by your company.
For an easy estimate of the direct and indirect cost of injuries, use the ErgoScience Injury Cost Calculator linked at the end of this post.
Step 2: Estimate Cost of the Testing Program
Once you have established a clear picture of the total costs of workplace injuries, you can compare that figure to the projected costs of a physical abilities testing program – outlined in estimates provided by potential testing providers.
Costs can vary according to the number of positions for which you want to screen and your hiring volume. There will be set up costs – conducting job analysis, developing job specific screens and training clinic(s) to perform those screens. Then there will be a cost per screen for each applicant tested. Screen costs vary depending on the length and complexity of the screens, the number of screens performed per year, the professionals chosen to administer the screen and the chosen screening vendor. Add the cost of development to the cost of the screens to get the total costs for the first year. For subsequent years, of course, the primary costs incurred are typically the costs of the screens. Since these costs vary from vendor to vendor, you’ll likely want to contact a qualified vendor to get a clearer picture of costs with their organization.
Step 3: Estimate Gross Savings from Injury Reduction
In our experience, employers with physically demanding jobs who implement a screening program see injury costs related to musculoskeletal strains and sprains and slips trips and falls decline by 50-60% within the first 1-2 years of testing. Use a conservative number of 30% and then a more aggressive 50% to see what your reduction in work comp expense would be.
Step 4: Estimate a Net Return on Investment
After determining the gross savings, subtract the cost of the program to get the net savings and divide that savings by the cost of the program to determine the ROI.
While every company is different, most find that a well-designed physical ability test program leads to dramatic reductions in workers' comp injury rates and costs. The University of Illinois, Chicago, to cite a particularly impressive example, realized $18 in savings for every $1 spent over a 3-year period following implementation of a pre-employment PAT program. Now that’s an ROI.