The Indirect Costs of a Workplace Accident

Workers’ compensation insurance helps insulate a company from the direct costs associated with an employee injury. For example, the company’s workers’ compensation policy will pay for medical care and will cover partial wages while the worker or workers recover.

While the direct costs of a workplace injury could manifest in increased workers’ compensation rates, companies need to be aware that they also pay indirect costs related to employee injuries and workplace accidents. In fact, studies have shown that the indirect costs of a workplace accident could be as much as 20 times higher than the direct costs. In some specialized industries, indirect costs could even be 50 times higher than direct costs.

What are some of the hidden costs of an employee injury or workplace accident?

  • Decreased labor and productivity: If you have one or several injured employees who are no longer able to work, this could create critical shortages that could slow production or bring certain departments to a standstill.
  • Lower employee morale: A bad injury at work can be distressing and traumatic, even to employees who are not injured. This could lower morale or cause distractions that lower productivity.
  • Less production: If your injured employee or employees were responsible for the production of products, you may have to deal with decreased inventory or longer wait times to sell products and collect payment
  • Damaged equipment: Damaged equipment from a workplace accident will need to be repaired or replaced. Not only will the repair or new equipment cost money, but every minute the equipment is not functioning could cost the company in productivity.
  • Disrupted schedules: Having to cover the responsibilities of an injured co-worker or try to work around a damaged piece of equipment can disrupt the schedules of your employees, leading to stress and loss in productivity.
  • Loss of customer and public goodwill: If a customer becomes aware of a workplace accident, or if their product or property was damaged, this could drastically undercut their confidence in your company. Not only is there a chance that they could fire you from the job, but in this world of Yelp and other highly public customer satisfaction websites, a negative review can hurt your chances to close future prospects
  • Hiring and training new workers: If your injured employee or employees are going to be out for an extended period of time, you might have to consider hiring a temp or bringing on a new employee or new employees. This will require time from you and your management team to interview, hire and train new employees. You’ll also have to absorb lower productivity until your new employees become proficient at their jobs.
  • Cleanup: If a workplace accident caused widespread damage, you or your employees may have to spend significant time cleaning up the damage, which will cost your company time and labor.

Just because your company has workers’ compensation insurance doesn’t mean you are insulated from the costs of a workplace accident or injury. In fact, the hidden costs of an injury are severe. The best way to avoid absorbing all the indirect costs of a workplace injury or accident is to try and prevent accidents as much as possible through the implementation of a strict workplace safety program.

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