This is the second part of a five-part series on why injuries occur in the food processing and how they can be prevented.
To read the introductory blog Click here.
Calculating the true cost of injuries in Food Processing.
In a post-COVID economy, labor costs are increasing and profit margins in the food processing industry are tighter than ever. Many organizations are exploring ways to cut costs from their budgets. One unnecessary cost is the money organizations spend on work-related injuries. But many companies don’t fully realize all the costs associated with a work-related injury.
Direct Costs. The direct costs of workplace injuries – “workers' compensation costs” – are fairly easy to quantify. The total incurred costs in your loss runs informs your organization as to how much is paid out for medical expenses and wage replacement. Many companies are surprised to learn that, as substantial as those workers' compensation costs are, they amount to only one half of the total costs associated with on-the-job injuries.
Direct Costs are just the tip of the iceberg.
Indirect costs. According to OSHA, indirect costs associated with work-related injuries are at least 1.2 times as much direct costs – which significantly increases the impact on the bottom line – but specifically accounting for them can be a bit more difficult.
So, what are these indirect costs? Here are six of the most important hidden costs of a work-related injury.
- Lost productivity – A workplace injury affects productivity in several ways. First, there is the distraction these incidents cause among workers when an injury occurs. Then there is the loss, whether permanent or temporary, of a skilled, experienced worker. Any temporary or replacement workers will not likely be as skilled and productive.
- Cost of replacement workers – If your organization fills the spot of an injured worker with a current employee, the company is likely paying that substitute worker overtime wages. If current workers are not available, the company will likely need to hire a temporary worker to fill the spot. And either solution is more expensive than the original employee and is likely to need at least some training in order to fill the role adequately. If the injured worker never returns to work, your organization will need to hire a permanent replacement creating a whole host of other costs associated with recruiting, hiring and training someone new.
- Paperwork and administrative time – A workplace injury means extensive paperwork, from accident reports to workers' comp forms and OSHA reporting requirements. Add to the paperwork, the administrative time involved in injury investigation and implementation of corrective measures, as well as dealing with cleanup and any necessary refitting of equipment or workstations after a workplace injury – all being very time-consuming tasks.
- Legal issues/costs – Workplace accidents always have the potential to become legal issues, which may include regulatory actions and/or lawsuits.
According to a white paper released in 2018 by CLARA Analytics (an artificial intelligence and data science company that specializes in machine learning products to improve injured worker outcomes and drive down unnecessary claims costs) litigation of work-related injuries increases the duration of disability and increases the time a claim will remain open. The study involved 11 years of data from 46 states. The study found that litigated workers’ comp claims were 3 times more expensive and took almost two times longer to close when they were litigated.
- Replacement of damaged equipment, property and/or products – Depending on the exact type of injury, property or equipment can be damaged or destroyed. Cleanup, repairs, and/or replacement of materials and equipment affected can be costly.
- Employee morale – When work-related injuries occur, it’s not uncommon for other employees to feel upset and demoralized. This is especially true if the injured worker’s friends and co-workers feel that the company was somehow at fault.
While this is not an all-inclusive list of indirect costs associated with on-the-job injuries, these are among the most prominent. All of these direct and indirect costs negatively impact the profitability of an organization.
What are the direct costs of strains and sprains and slips, trips and falls in your food processing and production organization? Whatever it is, just take that number and double it to estimate the total costs. Then based on your organization’s net profit margin, calculate the new sales your organization would have to generate to pay for those injuries. The numbers might surprise you. To help with that calculation, get our injury calculator here.
The next blog in this series will discuss traditional interventions that are typically used for controlling injuries in food processing and why they don’t always work.
For more information, contact Deborah Lechner, President ErgoScience, Inc. email@example.com