For me the end of daylight savings means spending time in the dark digging through financial reports developing a budget for the following year. Lots of time compiling information trying to get a sense of what next year is going to look like.
This year it dawned on me —where are Workplace Injuries? We all have them. They cost money, but why are they not on the Profit and Loss?
I assure you that Workplace Injuries are on your profit and loss. They just aren’t in the expense bucket of “Workplace Injuries”.
Where are they? Well, they tend to show themselves in other expense buckets, leading us to think they are something we don’t need to address.
What expense buckets? I’m going to show you.
Armed with this information, you can start thinking strategically on how to lower the costs of workplace injuries through the use of injury mitigation.
Need help with a better injury mitigation process?
What to Know About Health Insurance Premiums
From an individual perspective, Health Insurance has lulled us into thinking that the cost of an injury is what we pay to the provider after insurance has paid through a copay or deductible.
From an employer perspective, we think we pay insurance premiums and that is the end of it. Our premiums go up every year, and we have to provide insurance. That is the way it is and there is nothing we can do about it.
There are flaws in both perspectives. As an employer, you actually can do something about your health insurance costs and it starts with knowing where to find the costs of workplace injuries.
We know the cost of healthcare is large and it is only getting worse. Injuries that happen on the clock and off both have a huge impact to the bottom line.
Let's find these five hidden costs…
#1 - Insurance Premiums
We assume that Insurance Premiums go up every year and there is nothing you can do about it. That is not altogether true.
Smaller and smaller groups are starting to take advantage of becoming Self-Funded. By becoming Self Funded, you are taking on risk of the claims themselves.
Unfortunately, if you are fully insured, reducing workplace injuries doesn’t reduce your health insurance premiums. This will remain as an increasing expense year over year.
If you are self funded, you can start to take control of how you spend those healthcare dollars and start choosing methods that are more valuable. Do this right, and you could even see your healthcare spend decrease.
#2 - Workers Compensation Premiums
Workers Compensation Premiums are determined by your Experience Modification Rate, EMR Rate, or Mod Rate. Each year, your work comp carrier takes a look at your claim history along with your payroll information and produces a rate that is meant to measure the risk of injury for a given job classification. The higher the mod rate, or the more injuries you have, the more money in workers compensation premiums you can expect to pay.
#3 - Days away, restricted, or transferred
This one is a little more difficult to find on your Profit and Loss. But again, it is there.
When an injured worker is limited because of their injury, they may need time away from work, they may be restricted to a lighter duty until they recover from their injury, or they may be required to be transferred to a different area all together.
Each one of these has an impact on your bottom line. The employee themselves is less productive making the cost of whatever they were producing go up. Also, you may be required to replace this person because they can no longer perform as you had intended.
There is administrative work associated with making arrangements for the changes for this employee, causing your administrative cost per employee to go up.
Pay attention to the relationship between injuries and their associated Cost of Goods Sold (COGS) or Cost of Service. More injuries, more COGS.
#4 - Turnover Costs
Turnover Cost Assessments can range anywhere from from $2000 per employee to over 2 years salary depending on the level of employee lost. The more senior the employee and the more company knowledge held by the employee, the higher the turnover cost.
Injuries can lead to turnover. Employees are more likely to be injured in the first few months on the job, creating a vicious cycle that can be hard to break.
Turnover cost is hidden in similar places on the Profit and Loss as Days away. Production slows or can stop outright. Administrative costs go up as you work to replace the individual that left. When you find the new right fit, someone is pulled from other functions to train this new individual.
More injuries mean:
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more turnover
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lowered morale
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less engagement
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poorer culture
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less profitability
#5 - OSHA Fines
Except for certain low-risk industries, employers with more than 10 employees are required to keep a record of serious work-related injuries and illnesses. Injuries resulting in only first aid are not required to be reported.
All this reporting is compiled and can be found on the Bureau of Labor Statistic website along with how to calculate your rate. If your rate is higher than your industry average, you may end up subject to an audit by OSHA. These audits can end up in violations resulting in penalties that will end up somewhere on your profit and loss.
Below is the maximum penalty amounts as of January 15, 2020.
Type of Violation and Penalty
| Serious, Other-Than-Serious, Posting Requirements | $13,494 per violation |
| Failure to Abate | $13,494 per day beyond the abatement date |
| Willful or Repeated | $134,937 per violation |
While you won’t find a line on the profit and loss that says “Workplace Injuries”, I assure you that their cost is there and the amounts can be quite high.
Injuries will happen. Not all have to and there is something you can do about the costs associated with them when they do. By starting to know what injuries cost you, you can then start planning ways to reduce that cost.
About Therady
We formed Therady to reduce the Cost of Workplace Injuries. We can lower Health Insurance costs, reduce workers compensation premiums, reduce days away, restricted or transferred, and reduce turnover. And while our services can reduce the likelihood of an injury from occurring in the first place, we aren’t a safety strategy, but rather we optimize the efforts that are already in place and take them to a level that could not otherwise be achieved. Get a worksite assessment and let us show you where we can take your safety strategy.
