Safety in the workplace Featured

8:00pm EDT September 25, 2007

Providing a safe environment for employees makes good business sense on a number of fronts. Studies have shown that workplaces that establish safety and health management systems can reduce their injury and illness costs by up to 40 percent. In addition to potentially saving large sums of money, safe environments have also been shown to boost employee morale, which can lead to increased productivity and better service.

According to OSHA, lost productivity from injuries and illnesses costs companies $60 billion each year. In today’s competitive business environment, safety-related costs can be the difference between reporting a profit or a loss.

Determining the exact value of safety is challenging, but OSHA studies indicate that for every $1 invested in effective safety programs, $4 to $6 may be saved as illnesses, injuries and fatalities decline.

“It is obvious that even a little investment in safety can have huge dividends,” says Jim Kapnick, president of Kapnick Insurance Group.

Smart Business spoke with Kapnick about how safety programs can impact a company’s bottom line, how to quantify the true costs of accidents and the importance of staying the course once a program is in place.

How does safety impact the bottom line of a business?

A well-established, management-supported and documented safety program can have a huge impact on the overall bottom line of a company. Preventing incidents, whether they are injuries to employees or visitors, fires, motor vehicle collisions, environmental incidents or similar occur-rences, can reduce losses and thereby improve profits. The direct cost of insurance as well as many indirect costs, such as lost work time, productivity, damaged materials, etc., can upset what may otherwise be a profitable year.

What are some ways to measure and quantify the true total costs of accidents?

Most professionals agree that the direct costs of accidents — insurance premiums, deductibles, direct payments — can be multiplied by four to 10 times to calculate the indirect costs of the same instance. So if the direct cost of an accident was $2,500, an additional indirect loss of $10,000 to $25,000 can be expected. If your company is operating at a 5 percent profit margin, up to $500,000 in new sales would be needed just to pay for this loss.

How can the impact of a safety program be measured?

Company presidents, chief financial officers, human resource managers, risk managers and safety directors have spent countless hours trying to measure the impact of their safety initiatives. The truth is that it is very difficult to quantify something that didn’t happen. Accident rates [frequency and severity], premium costs, OSHA recordable incidents and the like are some common methods of measuring losses after the fact. Reducing these trends by implementing safety programs can be measured by comparing year-by-year statistics and quantifying the difference.

Can you provide a specific example of how a company has benefited from having a safety program in place?

One that comes to mind is a plastic injection molding operation that had an issue with cumulative trauma injuries, particularly carpal tunnel syndrome. The company’s management and employees worked together on ergonomic improvements and dramatically reduced their injury rates and severity and workers’ compensation costs, saving the company more than $100,000 per year.

What advice would you give about establishing an effective safety program?

I would caution business owners not to back down on their safety efforts as trends begin to improve. A safe and healthful workplace is truly a marathon and not a sprint. It requires a dedicated management team, supportive employees, trusted advisers — including your insurance agent, safety consultant and accountant — a budget and an organizational framework that outlines everyone’s responsibilities in order to truly be successful.

JIM KAPNICK is president of Kapnick Insurance Group. Reach him at (888) 263-4656 ext. 1320 or Kapnick Insurance Group is a member of Assurex Global, an international network of insurance and employee benefit brokers.