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average cost of workplace injuries

We are all aware that workplace injuries can be costly. However, do you know how much it costs? Unfortunately, most employers are unaware of the financial implications of an employee accident or illness. A worker’s compensation claim is usually the first thing that comes to mind after an on-the-job injury. The National Safety Council estimates that the average cost of worker’s compensation claims in 2019-2020 was $41,353. While this is a sizable sum, it is only a fraction of the true cost of workplace injuries and illnesses.

The true cost of a workplace injury highlights the financial ramifications and forces you to consider the secondary effects of an accident. It also aids in the development of an effective workplace safety program. When organizations realize the financial impact of an accident, the importance of safety becomes clear. A strong safety culture in the workplace can provide a huge return on investment. For example, an intensive inspection program can detect errors, lowering the risk and severity of injuries. It also reduces the likelihood of receiving an OSHA citation. Additionally, demonstrating that a company cares about its employees’ safety will boost employee morale.

This article will go over the costs of workplace injuries that you may not be aware of. These cost estimates assess the economic impact of workplace injuries and illnesses on employees. They reflect the impact on the affected employee as well as the organization as a whole.

Statistics surrounding workplace injury costs

Every accident and every business is unique. Only by measuring your costs can you effectively calculate them. Unfortunately, these workplace injuries cost businesses thousands of dollars in medical and other expenses each year.

  • Workplace injuries and illnesses majorly impact a company’s bottom line. In 2021, the Workplace Safety Index, Liberty Mutual estimated that employers pay almost $1 billion weekly for direct worker’s compensation costs only.
  • The Bureau of Labor Statistics reports that approximately 2.7 million nonfatal occupational injuries and illnesses are reported by commercial industry employers annually.
  • According to the National Safety Council, workplace injuries cost about $161.5 billion annually, equivalent to $1,100 per worker.
  • On average, the cost of a worker’s death is $1.15 million, while the cost of a medically consulted injury is $39,000. types of expenses associated with workplace injuries.

The specific cost of direct expenses will vary depending on factors like the type of industry or the extent of the injuries.

What types of costs are there?

If workplace safety measures are not implemented and an injury or illness occurs, it costs the injured worker, their family and friends, coworkers, and employers something. There are two types of costs incurred in any injury: direct and indirect costs of workplace injuries.

Direct costs

Direct costs associated with workplace injuries are expenses incurred as a result of workplace incidents covered by insurance. They are the expenses that are directly related to the injury. Most people are familiar with these costs. They are the costs that are easily quantifiable. Direct workers’ compensation costs for workplace injuries and illnesses for a self-insured employer include:

  • Claim Cost – 80%
  • Administrative costs – 10%
  • Excess premium – 8%
  • Other – 2%

Here is a breakdown of these direct costs :

Medical expenses

Employers pay premiums to insurance companies to compensate the health system for any medical, pharmaceutical, and recovery costs incurred by workers affected by workplace injury. These costs cover the following:

  • Hospital bills
  • Doctor’s fees
  • Cost of medication
  • Ambulance costs
  • Physicians
  • Physical Therapy
  • Forthcoming medical expenses

Replacement of things

If an occupational accident occurs as a result of faulty or missing equipment or machinery, the employer is obligated to pay to repair, replace, or install the equipment or machinery.

Indemnity payments 

If a workplace injury occurs and investigations reveal that it was caused by a failure to comply with safety laws, the employer may incur additional direct costs as a result of situations such as court proceedings, including

  • Investigations
  • Costs for legal services
  • Disability Compensation
  • Death Benefits
  • Dependent Benefits
  • Legal Expenses
  • Settlements

Program Costs

  • Claims Administration Expenses
  • Insurance premiums and deductibles
  • Excess Premium
  • Other (Taxes, Surety, Assessments, etc.)

These costs can vary significantly depending on a company’s experience modification rate. But according to the National Council on Compensation Insurance, the average cost of a workplace injury claim is $40,000.

Indirect costs of workplace injuries

You should also consider the indirect costs incurred in addition to the direct costs. Although less well-known, these costs are just as high – if not higher – than direct costs. In a more literal sense, direct costs are what we can see, whereas indirect costs are the much larger, much deeper parts that we cannot see without careful inspection. The following are some examples of indirect costs associated with an occupational injury:

Time lost

When a workplace accident occurs, everything comes to a halt. Before continuing with work, you must attend to the injured workers, determine what caused the accident, and inspect the machinery and equipment. Anyone who attends to the injured worker, including the accident victim, is on the clock, which equals lost time.

OSHA fines and penalties

Depending on the circumstances of the accident, an OSHA investigation may be conducted. If OSHA discovers that your company is not following safety precautions, you will be fined heavily. A safety violation carries a standard fine of $14,000. If OSHA discovers several safety violations, the fine could quickly rise.

You may also have to pay for the services of a lawyer to help you challenge or reduce citations, as well as consultation and administrative fees. Apart from the financial burden these penalties imposed on your company, they also harm its reputation. Clients will avoid a company that is perceived to be negligent in terms of employee safety.

Recovery of lost productivity

When one or more of your employees is injured, it is possible that they will be unable to continue working, or that if they do, they will be less productive. However, the business must continue. To fill these positions, you will need to hire and train temporary workers, pay overtime for other employees to cover for the injured ones, or simply accept lower production volumes. Whichever option you choose, will have an impact on the bottom line. An inexperienced worker may be unable to match the injured worker’s efficiency and output.

You may also lose production time while the employee recovers. You must accommodate the injured worker’s physical limitations or repair damaged equipment, all of which result in lower quality and productivity. Serious accidents may necessitate a temporary shutdown of the production line to allow for investigations into what caused the accident.

 

workers compensation insurance

 

Secondary human resources

Workplace injuries can be complicated in some cases. If the affected employee files a claim, you may incur additional costs. During litigation, you may need to seek legal counsel. To verify the injuries, you may also need to hire third-party consultants and independent medical examiners. These experts are not cheap, and their costs can quickly add up to become a significant cost factor for the business.

Staff administrative time spent

How much time will your human resources team need to work on a claim efficiently? Your managers will need to inspect the accident site, make new schedules to accommodate the missing employees, and hire and train new workers. To complete an investigation, they will also need to fill out paperwork and write reports. All of these factors consume your working hours, impede productivity, and ultimately have an impact on your bottom line.

Increase in workers’ compensation insurance premiums

Workers’ compensation premiums for businesses are based on a theorem that rates the business’s safety score. Essentially, this algorithm assesses the cost of your claims over a three-year period. It compared your results to those of other businesses in your industry. Your insurer will lower your premiums if you have fewer claims and lower costs. However, if you have more claims and higher costs, your premiums will automatically rise. As a result, the more workplace injuries you report, the higher your premiums will be.

Emotional Costs

There are less obvious indirect workplace injury costs, the most common of which is lower employee morale. When a serious injury or death occurs, the emotional toll that recognized safety risks can cause can leave employees feeling unmotivated and psychologically suffering, lowering output. As a result, delivery delays may occur, negatively impacting the customer experience. All of these factors have an impact on the overall performance of the company.

Employees want to work in an environment where they feel safe and well-managed, and where management is concerned about their safety. Employers can boost employee confidence in workplace safety by developing programs that integrate with the normal course of business, recognizing and rewarding employees for adhering to safety measures put in place, and maintaining a message of security as a priority.

Because each accident is different, indirect costs may vary, making it difficult for employers to calculate the total cost of workplace injury.

So what is the actual cost of indirect workplace injury

According to the breakdown above, the indirect costs of workplace injuries are extensive and difficult to quantify. Depending on the type of business and the circumstances surrounding the accident, these costs can be two to five times higher than direct workplace injury costs.

Many researchers have observed this issue and identified methods for evaluating the indirect cost due to the ambiguity of these costs. According to one study conducted by Harvard University, the Liberty Mutual Research Institute of Safety, and the University of Wisconsin Oshkosh, for every dollar spent on direct costs, approximately $2.12 is spent on indirect costs, even with an insured program. What exactly does this mean?

This corresponds to an average indirect-to-indirect cost ratio of 2:1. Because the average direct cost is $40,000, indirect costs are $80,000 ($40,000 x 2).

What is the total cost of an injury?

Using the figures from direct and indirect costs, we can find that the real cost of workplace injury is

Direct Cost + Indirect Cost = Total Cost

$40,000 + $80,000 = $120,000

So on average, an employer will spend about $120,000 on each workplace injury.

Looking at workplace injuries holistically, it is clear that they affect both the injured individual and the entire company. An injury reduces output, necessitates additional administrative effort, depletes funds from the bottom line, and results in additional costs associated with low employee morale.

Workplace injuries are costly, it is a fact. While they cannot be completely eliminated, solid safety programs can help reduce them. However, it takes time to reduce the cost of workplace injuries and illnesses. It is not something that can be accomplished overnight.

Organizations must develop a strategic plan to reduce accidents over time and establish a strong safety culture. This could include investing in proper PPE and safety signage, holding employees accountable, and developing a safety program to ensure the health and safety of your employees on the job. A well-structured safety program effectively reduces workplace injuries as well as all hidden costs that the business would incur, resulting in increased profits over time. This can be less stressful and less expensive than dealing with regular workplace accidents. Given the actual cost of workplace injuries and illnesses, it is worthwhile to invest some money now to avoid the total cost of workplace injuries and illnesses later.

Need to file a workplace injury claim? 

Workplace injuries, whether from a simple slip and fall or a major industrial accident, should never occur. Your employer should provide adequate care, training, and maintenance to ensure that their employee’s health is not jeopardized. If you have suffered a workplace injury and believe it was caused by your employer’s negligence, you have the legal right to seek restitution for your pain and suffering.

Gregory Spektor & Associates, a Queens-based law firm, understands your pain and suffering, cares about your well-being, and is here to assist you with your workplace injury claim. While we cannot change the past, we can assist in changing the future.

Our skilled Attorney will advise you thoroughly on your best options. To schedule a free consultation with one of our highly trained and experienced attorneys, call 1 (888) 797-7735.

About The Author

Gregory Spektor

Gregory Spektor

Gregory Spektor, Esq. received his Bachelor of Science in Computer Engineering Degree from NYU Poly in 1994 and thereafter his Juris Doctor Degree from Touro College Jacob D. Fuchsberg Law Center in 2006. more…