How prevention saves a small business money

Oct 09, 2014

Injury costsAll too often, people see health and safety as a cost rather than a savings. But investing in health and safety is a solid business strategy that can protect your people while improving profitability.

Ontario's Workplace Safety and Insurance Board (WSIB) has calculated the average compensation cost of a claim in 2010 to be over $19,000. This is just the direct cost. Associated costs could total three to 10 times that amount. In other words, preventing an injury could save your business from $19,000 to $190,000.

Avoidable direct costs include:

  • lost productivity and revenue
  • surcharges and lost revenues
  • Ministry of Labour orders.

A detailed breakdown of associated costs provided by Ontario's Workers Health & Safety Centre provides additional insight into the full costs of an injury. Taking these potential costs into account can help you allocate resources where they'll provide the greatest return.

Capital costs

  • maintenance/repair of damaged equipment/machinery
  • expedited depreciation of damaged equipment/machinery
  • removal/disposal of damaged or redundant equipment/machinery
  • loss/removal/disposal of damaged raw material or product
  • clean up and/or maintenance
  • equipment/machinery rental
  • purchase and installation of new equipment/machinery
  • other workplace modifications

Administrative costs

  • managing the incident scene
  • investigating the incident
  • filing and managing claim and claim process along with other WSIB ramifications (e.g., Workwell Audit)
  • dealing with Ministry of Labour (MOL) inspectors and orders
  • managing return to work or modified work
  • rescheduling/reassigning staff
  • recruitment
  • developing new work procedures
  • external OHS services (consultants, engineers)
  • in-house activities (promoting awareness and prevention efforts)
  • developing, implementing, evaluating and maintaining new health and safety policies and procedures
  • developing, implementing and maintaining a preventive maintenance program
  • developing, implementing and maintaining new hazard or job specific training
  • negotiating/working with a union or workers

Employee-associated costs

  • higher absenteeism
  • higher turnover
  • overtime (to cover productivity shortfalls)
  • wage supplements, benefits (to the injured worker or family in the case of a fatality)
  • wage/benefits of replacement worker

Insurance costs

  • higher WSIB premiums
  • WSIB penalties/surcharges
  • higher short/long term disability benefits/premiums

Legal/regulatory costs

  • legal costs, fines, indemnities
  • expert witness fees
  • MOL orders - cost of compliance

Production costs

  • loss of skilled/productive worker
  • replacement worker who is less productive/may produce lower quality product or service

Intangible business costs (damage to your business reputation)

  • diminished attractiveness to potential employees and customers
  • lower retention of existing workers and customers
  • damaged corporate image and public trust

None of these categories take into account the physical, emotional and financial harm injuries can cause workers, including:

  • acute and chronic pain and suffering
  • loss of income and accompanying economic uncertainty
  • emotional and financial losses experienced by their families, friends and community.

A safe and healthy workplace is good for business. It protects workers from injury and illness, lowers injury/illness costs, reduces absenteeism and turnover, increases productivity and quality, and makes the business a more appealing prospect for employees and customers.

How WSPS can help

The first step to maximizing your health and safety return on investment: understanding what hazards may be present in your workplace.