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Why Cost-Cutting Safety May Cost You More
As 2010 really gets underway, it's painfully obvious that
the construction industry and industry in general
have a long way to go before we can start celebrating
"recovery" from the economic crisis.
According to the APD National Employment Report for
January 2010, construction employment fell by approximately
37,000 jobs, manufacturing by 25,000 jobs, and the goods-producing
sector lost 60,000 jobs from December 2009 to January
2010. While these figures represent a decrease in the number of
people losing their jobs each month, they are a long way from
the positive employment figures all of us would like to see.
Greater competition for the few contracts and sales out there
means the companies that get the work are likely to have a pretty
meager profit margin. The temptation is to shave off every cent
that isn't considered absolutely necessary to get the job done.
Often, the first things to bite the dust in a slow economy are
safety incentives and maintenance programs.
Business owners and managers just can't see
spending money on that safety officer or safety
training for the employees when cash is tight
and they need to buy materials. So the superintendent
or supervisor doubles as the safety
oversight; employee safety training shrinks to a
10-minute talk when he or she has time, which
is rarely; and the new brakes for the company
truck will wait until next month.
The company saved money, right? Maybe
not. Cutting back on safety expenses could
amount to gambling with not only the health
and well-being of workers, but also with the
profits and perhaps the company itself.
'I have a small company with just a few employees,
and we don't have many accidents.'
Small companies, even those with good accident histories, can
be much more vulnerable to the costs of safety program deficiencies than large ones. They often don't have the extra resources
needed to help them through the aftermath of an accident.
Plus, you do not need to have an accident to incur lack-of-safety
Take the case of a family-run construction company here in
Denver that recently came to us for help and advice. The company
had just been visited by OSHA at one of its projects, a small
project paying only around $10,000, much of which had been
subcontracted out. The company had a mainly accident-free history
and had never before received a citation.
But when asked about employee training, managers had no
proof that any of the employees or owners had enough training
to be a competent person for the scaffolding that was erected on
the site. Now, nobody had been injured, and the scaffolding had
been erected correctly, but OSHA rules state that a competent
person must oversee the erection, alteration, and dismantling of
OSHA issued citations to the tune of almost $5,000.
Even though we negotiated a reduction in the fines, the company
was still very much out of pocket on that minor project.
What's more, an OSHA fine cannot be counted as an expense
on the company books. It's a penalty and not tax deductible.
This company also had to immediately foot the cost of employee
training, plus the cost of lost work hours while that training was
In one way, this company was lucky. The incident caused
managers to realize where their safety deficiencies lay before an
accident occurred. Being responsible and thoughtful employers,
they made every effort to correct the situation immediately.
'Accident costs? That's what I have
workman's comp insurance for, isn't it?'
Worker's compensation insurance covers only a
fraction of the total cost of an accident — the
portion that contains the employee's medical expenses
and partial wages. Your premiums probably
will go up afterward, too.
To know how much you're really laying
down on the poker table by cutting the safety
budget, you need to look at the total cost of what
could possibly happen. More is involved in that
total cost than some might think.
Have you thought about the cost of having a
key employee away from your project or facility
for even a short period? With almost any accident,
there will be lost production time and investigation costs.
How about the wages of the less-experienced person who is
going to cover that position and the cost of extra training he
might need? You may have to pay for equipment damage and
Another cost that often is not immediately recognized: A serious
or fatal accident can affect your business reputation and
the confidence your customers have in your company. It might
even close your business down. Actually, the indirect costs of an
accident often are the majority of total costs incurred.
OSHA's $afety Pays Program helps small businesses
achieve some idea of how much the average accident can cost
For instance, the site calculates the
total cost of an average laceration injury
to be more than
$32,000, and that is
among the lowerpriced
An average back injury
could cost as
much as $180,000,
according to the program.
Total cost is
calculated by adding approximate direct
and indirect costs.
The direct costs of accidents are estimated
from information provided by The
National Council on
Inc. using figures
reported in 2004.
OSHA's program uses
the Business Roundtable
to calculate the indirect cost estimates,
which are based on a study conducted
by the Stanford University Department
of Civil Engineering. While aimed at the
construction industry, the results also
should have meaning for manufacturing
and other industries.
Of course, this program does not include
penalties and legal costs if you happen
to incur them, and we all know what
has happened to insurance expenses in
the past six years. So even this figure is
likely to be a good deal lower than the actual
amount a company might pay today.
'I've got the message but can't afford
a safety person right now.'
There is a mountain of help out there,
from fact sheets and free publications to
magazines, blogs and online networks.
Join an online safety forum where you
can ask questions and get answers from
other people in your industry and the
safety industry. Check OSHA's Web site for
free publications — believe me, there are
lots of them.
Make sure you understand today's
regulations and requirements rather than
assumptions you may have gathered during
your years in your industry. Thoroughly
assess your workplace and actively
encourage employees to report hazards.
Make sure your program addresses the
hazards that exist or are predictable in
Most of all, be involved and ensure all
of your supervisors and employees are involved
and invested in keeping everyone
safe. A supervisor who will turn a blind
eye to an unsafe act is not doing you, the
company, or the employee a favor. Your
safety program can be only as good as the
planning, education, and enforcement
that go along with it.
The truth is, whether you're a small,
family-run business or a large corporation,
you simply can't afford to cut corners
on your safety program any more
than you can buy in substandard materials
and expect it not to cost you more in
the long run.
In the safety industry, there's a saying:
If you think safety is expensive, try an accident.
This article originally appeared in the April 2010 issue of Occupational Health & Safety.