Why Safety Training Can Positively Impact Profitability

Why Safety Training Can Positively Impact Profitability

In 1970, the year Congress enacted the Occupational Safety and Health Act (OSH Act), nearly 14,000 workers were killed on the job in the United States. Over the next ten years the Occupational Safety and Health Administration (OSHA) established regulations for workplace safety, inspection procedures, and limits on harmful materials in the workplace. OSHA’s policies were developed and implemented throughout the 1970s and by the 1980s, the positive effects of the agencies work were apparent. By 1989, the number of workplace fatalities averaged 6,359 per year down more than 50% from 1970. In 2017 fatalities had dropped even further to 5,147. In states where written injury and illness prevention programs (IIPP) are mandated by state law, research indicates those states had workplace fatality rates as much as 32 percent below the national average. The establishment and enforcement of safety regulations have saved tens of thousands of lives.

OSHA made a considerable impact in some very specific industries. Since the strengthening of OSHA’s trenching rule in 1990, trenching fatalities on construction sites have declined by 35 percent. The agency’s 1978 cotton dust standard is credited for reducing the number of people that suffer from brown lung disease from 12,000 in 1978 to approximately 700 in 2000. Charles Jeffress, the OSHA Administrator in 2000, stated that OSHA not only “helped save lives and reduce illness, but is also cost-effective for industry.”

As important as federal safety regulations are, the most effective accident prevention happens at the company level. Each company, especially those in high-risk businesses, should create their own written safety plan to show management’s commitment to safety. Accident prevention policies are most effective when they become part of the corporate culture and are not simply rules to follow. A 2014 study on worker engagement explained that management should “be concerned about winning over the minds and hearts of their workers through human performance-based safety management systems designed to promote and enhance worker engagement.”

Despite what some may suggest, implementing a strong safety program is not a burdensome cost and should not be neglected or eliminated to help the company’s bottom line. In fact, safety programs are the price of doing business and, over time, may increase a company’s profitability through lower insurance costs, improved employee morale, and fewer missed work days.

Government data shows that companies implementing injury and illness prevention programs will “reduce injuries by 15 percent to 35 percent [compared to] employers who do not now have safety and health programs. At the 15 percent program effectiveness level, this saves $9 billion per year in workers’ compensation costs; at the 35 percent effectiveness level the savings are $23 billion per year.”

Insurance companies assign an experience modification rate (EMR) number to measure the risk they are taking by having a company as a client. If a company’s EMR is lower than 1.0, the insurance company considers it less of a risk than the average company and workers’ comp insurance will be less. Higher than 1.0 means the company is riskier and the premiums will be higher.

Business’ therefore have a financial incentive to reduce their perceived risk to insurance companies to get a lower EMR. Implementing an active safety program shows insurance agents that your company is serious about accident prevention. Safety consultant Rick Dalrymple during an interview with iReportSource explained how one company paying $249,000 for their workers’ comp renewal got a substantial discount by implementing new safety policies. “When the underwriters received verification of new policies and procedures that they put in place to mitigate future risk, the underwriter felt more comfortable and revised their renewal quote down to $200,000, giving them an immediate $49,000 in savings for their insurance premiums.”

The US Department of Labor has an online calculator to estimate the direct and indirect cost to a business when an employee has an accident. The $afety Pays calculator also approximates the amount of additional sales needed to recoup the costs of the accident.

For example, a “fracture” or a broken bone has a direct cost of $53,458 (hospital bills, doctors’ fees, medicines) and indirect costs of $58,803 (lost wages, household production losses, fees for administering workers’ compensation) for a total of $112,261. The company needs to produce more than $3.7 million in sales to recoup the costs associated with a broken bone. The point of the calculator is to emphasize how much even small accidents cost a company and, more importantly, how much can be saved with each accident that is prevented.

Statistics are clear that companies with robust safety programs, especially companies where safety is part of the corporate values, have fewer accidents than companies that do not prioritize safety. Following government safety regulations and building a team based on being safe saves money, solidifies team spirit, and leads to a happier and more profitable business.

Next Steps:

  • Read more about Facility Maintenance Safety in these posts-Part 1 and Part 2.
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