The Economic Aspect of Health and Safety

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Safety supervisor reviewing policy with employeeOccupational health and safety (OSH) management can – and should – be viewed in monetary terms as part of a business system. When a company employs skilled health and safety personnel and calculates the potential loss of work hours caused by injury and illness into cost analyses, the true value of occupational health and safety in the workplace becomes startlingly clear.

An expert in OSH management should be able to build an economy of health and safety that is seamlessly integrated into the company culture.

Create a safe work environment

In 1970, the U.S. government introduced the Occupational and Safety Health Act. Created to assure safe and healthful working conditions for working men and women, it authorized enforcement of standards developed under the act and provided for research, information, education, and training in the field of occupational safety and health, according to the Occupational and Safety Health Administration (OSHA) website.

Along with this law that primarily covers private sector companies in the U.S., Congress created OSHA within the U.S. Department of Labor. While each state has its own distinct safety and health standards and regulations, all workplaces are still covered by the OSH Act.

By following these standards and regulations, health and safety personnel are responsible for maintaining a safe workplace environment, which is essential for employee retention and job satisfaction. But the health and safety expert must also help an employer understand that abiding by these federal standards can result in financial savings.

The Business Benefits page of the OSHA website lists these cost savings that can be achieved when an employer invests in changes to improve workplace health and safety:

  • Lower workers’ compensation costs and medical expenses
  • Avoidance of OSHA penalties
  • Reduced costs to train replacement employees
  • Reduced costs to conduct accident investigations
  • Significant improvements to the company’s productivity and financial performance

A health and safety policy must be enforced in order to be successful, which is the job of the OSH expert. The policy and any updates also have to be communicated clearly to employees. Regular meetings are one way to offer a refresher of safety regulations and also allow employees to ask questions or voice concerns. Employers can order the official OSHA health and safety poster and place it in a common area where employees can have a permanent, visual reminder of the safety and health rules and regulations at their workplace.

Calculating the costs of health and safety

Because of tight budgets, companies sometimes try to spend the minimum amount possible to comply with safety regulations. However, cutting costs by investing in lower quality work equipment, machinery, and tools can lead to a higher risk of financial loss resulting from a workplace injury or accident.

In his article “The Economics of Workplace Safety” for Occupational Health & Safety online, R. Todd Swinderman reports that “planning safety upgrades based upon price alone results in the lowest-quality equipment achieving the minimum compliance – often with no reasonable options to rectify the problems other than spending more on another solution – rather than focusing on long-term life cycle cost. So in reality, accidents caused by shortsighted and economically driven solutions harm people, degrade the environment, and reduce the company’s bottom line.”

This reasoning is exactly why OSH personnel should show management the hard numbers that reveal the potential financial impact of injured or sick employees on a company’s bottom line.

OSHA offers a free interactive tool called “Safety Pays” that companies can use to calculate the average financial loss caused by injured or sick workers taking a leave of absence or working only part-time. A workplace safety expert can use this tool to provide management with estimates of both direct and indirect costs associated with an employee’s injury or sickness.

Costs can vary widely depending on the employer, but OSHA’s website lists some examples of the types of indirect costs that Safety Pays can help estimate:

  • Any wages paid to injured workers for absences not covered by workers’ compensation.
  • The wage costs related to time lost through work stoppage associated with the worker’s injury.
  • The overtime costs necessitated by the injury.
  • Administrative time spent by supervisors, safety personnel, and clerical workers after an injury.
  • Training costs for a replacement worker.
  • Lost productivity related to work rescheduling, new employee learning curves, and accommodation of injured employees.
  • Clean-up, repair, and replacement costs of damaged material, machinery, and property.

In addition to these indirect costs, OSHA lists several more that cannot be determined by the Safety Pays tool but should be seriously considered by the employer:

  • The costs of OSHA fines and any associated legal action
  • Third-party liability and legal costs
  • Worker pain and suffering
  • Loss of goodwill from bad publicity

A comprehensive health and safety plan is a smart financial move for any company. OSH experts, including graduates of a bachelor of science in occupational safety program, can help management identify workplace hazards and put together an effective injury and illness prevention program.

Eastern Kentucky University’s Bachelor of Science in Occupational Safety Program

Eastern Kentucky University’s online bachelor’s degree in occupational health and safety program is designed to teach students how to identify and analyze potential workplace hazards and risks that can lead to considerable financial loss in an organization. Experienced safety professionals guide students through environmental online health and safety courses, covering modern trends in employee engagement and the establishment of a safety culture in the workplace, which is inherently beneficial for a company’s bottom line. For more information, contact EKU today.

Recommended Reading

Increasing Employee Engagement and Participation in Workplace Safety

Rethinking the Safety Triangle

Leadership in Safety Management


Business Case for Safety and Health –  OSHA

The Economics of Workplace Safety – OHS Online

Safety Pays online tool – OSHA