Productivity and Profitability

 

 

Health and Safety compliance can increase productivity and profitability across an entire organization. By protecting the most valued asset of an organization, its employees, an effective OHS program will improve the well-being, job satisfaction, quality performance as well as increase the productivity of the employees.

Financial impact and ROI

 

 

It is true that it costs money to implement an OHS program. However organizations are increasingly realizing the substantial financial benefits arising from having an efficient and effective OHS program in place. Recent studies have shown that the costs are more than offset by the savings resulting from fewer workplace incidents - not to mention the corporate marketing advantages of good corporate governance and a record of a low frequency of incidents.

Liberty Mutual⁴ , a leading US provider of workers' compensation insurance, interviewed 200 executives responsible for workers' compensation at their companies. Of the companies interviewed 75 were from mid-size companies with 100 to 999 workers, and 125 from big companies with over 1,000 workers. Of the total 95% of these executives said that workplace safety has a positive effect on financial performance. Significant findings were:

• Safety positively affects financial performance.
• Safety has a substantial positive effect on operational performance.
• Safety has a positive ROI: Each $1 invested returns between $3 and $10.
• There is a close relationship between direct and indirect costs of accidents; there are between $3 and $5 of indirect costs for each $1 of direct costs.

 

 

Using a very modest ROI calculator a compensation claim of $4,000, (plus an additional indirect cost of $12,000) would require a company with a profit margin of 5% to sell additional $320,000 worth of product to make up the loss. A nasty $100 000 claim could put the organization at risk to increase sales with $8 million to make up the loss

The following are some of the direct and indirect financial aspects that often come in to play and that should be consider when evaluating the actual cost of an injury to a single employee:

• Training and enumeration of a replacement worker.
• Overtime pay for the regular employees who have to pick up the slack.
• Increased contributions to workers' compensation.
• Lost working hours after an accident/incident occurs.
• Work stoppage due to hazardous conditions.
• Medical costs.
• Potential legal costs.
• Potential impact on organization's reputation.
• Incident investigation cost.
• Property / material damage.

 

 

Moral Obligation

 

 

The most important motivator for organizations to implement and maintain an efficient and effective OHS program should be that non-compliance and a poor OHS program can compromise and endanger the health and safety of workers. Employees have moral and legal right to a healthy and safe work environment. Unfortunately this obligation is not always high on employers' priority list and it often takes a backseat to the perceived cost to implement an OHS program.

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⁴On August 29, 2001, Liberty Mutual Insurance Company released a report titled: A Majority of U.S. Businesses Report Workplace Safety Delivers a Return on Investment.