Updated: Mar 3, 2022
Wait, Workplace Safety & Health Has Hidden Costs?
What Types Of Costs Are We Talking About?
Workplace safety & health has a cost one way or another. The cost exists whether you plan to be safe or not. We won’t be getting into the routine, expected costs of safety. Hidden costs, on the other hand, tend to crop up where we aren’t paying as much attention.
For example, a piece of equipment requires frequent, unplanned maintenance. Perhaps it wasn’t designed for the load it’s required to bear. Or, maybe a mobile equipment operator hit the equipment by accident, causing the need for repairs. Speaking of accidents, often a lot of money is spent dealing with these unfortunate occurrences. Not surprisingly, accidents can cost companies by direct harm to people or property. That’s pretty straight forward. However, they can also cost in the form of reduced productivity.
When you have an accident, it’s usually all hands on deck. You know what that also means? It means that while employees are responding to the emergency, they aren’t doing their normal productive tasks. Therefore business profits are hit on both the income and cost sides of the formula!
Use The Hierarchy Of Controls
The hierarchy of controls are the order that workplace safety & health hazards should be approached. They are as follows: elimination, substitution, engineering, administrative, and personal protective equipment (PPE). I bring these up because if you can either eliminate, substitute, or engineer the problem away, then your employees can focus on their primary duties. There’s a considerable benefit to not piling on more unnecessary work to employees since it’s their production tasks that help to bring in the bacon.
Unfortunately, it’s often infeasible or an afterthought to use the first three controls. This can be problematic in the afterthought case in a similar way that remodeling a house can be problematic. Nevertheless, it’s worth taking a hard look at doing the most effective controls where you can. This is not to say that there is no value in administrative or PPE controls. These controls have their place when it doesn’t make sense to use the others. Just remember that they are to be your last line of defense against hazards, not your first.
Those Pesky Accidents
Accidents are a big deal when it comes to hidden costs. It’s pretty hard to know what your workplace safety & health costs are if you aren’t tracking them. So, do you have a method for tracking just how much it cost to deal with an accident? If you do track costs along with applicable accidents, do you just track the obvious stuff? Or do you also track the time employees spent responding to the accident, writing up the report, and performing the investigation?
You need to know why the money was spent, and what it was spent on. You’ll likely have a considerably easier time selling management on safety improvements when you do this. Turn improvements into lucrative return on investment projects. It will be hard for management to say no. But, you can’t do that well if you don’t match your accidents up with the actual costs.
Sure, there are estimates out there to help calculate approximates on how much product a given accident costs a company on average. But those numbers just don’t have the same impact as what you actually have spent. The goal for this category is to learn enough about the accident such that you can keep it from happening again. If that isn’t possible, then seek to minimize the chances of the accident occurring again. That’s where you can potentially recuperate your losses.
Maintenance, Maintenance, Maintenance
Maintenance and safety go hand in hand. After all, which department does most of the equipment fixing and modifying? The thing is, it’s easy for safety related costs to get buried in what maintenance has to spend on its various tasks. Much of what maintenance has to do relates to normal wear and tear of equipment. They also see a lot of planned equipment upgrades.
But what about the equipment that failed because it had a bad short in it, with the equipment being new? What about the flat tire a piece of mobile equipment needs changed because the operator ran over something sharp? How about the constant repairs to a pulley chain assembly because the mobile equipment operator keeps dropping the material harshly on it? The list can go on and on, but there are events that deserve further scrutiny.
Many people think safety is all about protecting workers. And that is certainly part of it. But the point of a business is to produce a product that it can sell at a profit. Damaging property, whether processing equipment, buildings, and the like make it harder to do that. It’s a must that maintenance work is evaluated for any relation to safety. It isn’t enough to just fix the immediate problem if it doesn’t solve the root cause of the problem. Solving the root cause of the problem can help reduce long-term costs, as well as free up maintenance to do routine and preventative maintenance. Routine and preventative maintenance have their own benefits that are often overlooked.
Indirect Vs Direct Costs
Direct costs are going to be pretty straight forward. These will include costs to repair or replace equipment, medical costs for injured employees, and the cost of any raw materials damaged in an accident. Indirect costs will be more towards things like the labor costs to respond to the accident, labor costs for performing the accident report and investigation, lost production time due to the interruption of the accident and equipment being inoperable. Indirect costs can also include increased labor costs due to overtime to fill in the gap of having an injured worker unable to work.
You could look at things in terms of indirect vs direct costs. But it’s better to think of them as total costs. You will have to pay for them if you don’t have a good solid plan to keep your workplace safe, productive, and efficient. It’s still extremely important to take a hard look at indirect costs due to them being difficult to see and initially quantify. These costs can be considerably bigger than direct costs and can sneak up on you before you know it.
Shine Light On Your Safety Costs
Any costs that are hiding from you are just waiting to jump out and bite you. And they do it at the most inopportune times. But when they aren’t hidden anymore, you can see that they are about to pounce on you. This can enable you to do something to protect your business. It’s vitally important to identify the costs spent on safety to make sure that they are as close to a beneficial investment as possible. Make your safety improvement efforts pay dividends in the form of increased productivity and decreased overall costs.
Fortunately, you’re seeing that it isn’t as hard as you might have thought to start looking for where your hidden safety costs may be hiding. Don’t let the costs you currently have fool you into thinking that it’s just the cost of doing business. The cost of doing business without doing your homework can be like inflation. It just keeps getting bigger. If you have an effective strategy, you can turn that back the other way and your business will likely be much better off for it.