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The hidden costs of worker’s comp claims for manufacturers

Friday, July 14, 2017

Because worker’s compensation claims can be very costly, managing risk by making investments and setting policies that improve workplace safety is not only good for employee well-being, it is also good for a business’s bottom line.

According to our partners at Travelers, more than 100,000 workplace injuries occur in the United States manufacturing sector each year. Of these, the top 5 types of injuries include — coming into contact with harmful objects (40%), overexertion (24%), slips and falls (19%), repetitive motion (8%), and contact with harmful substances/chemicals (6%).

When workplace injuries occur, there are obvious, direct expenses such as covering medical and rehabilitation costs. And in the manufacturing sector, the extended absence of even one key employee due to injury can disrupt an entire operation. Many manufacturing employees have specialized skills that are not easily replaced on short notice. Others have knowledge of legacy systems that is literally irreplaceable.

Even higher than the direct costs of workplace injury, though, are the indirect costs. The American Society of Safety Engineers estimates that indirect costs and impacts of a worker injury are up to 20 times greater than direct costs.

Some indirect costs may include:

Hiring temporary workers — On short notice, you need to scramble to find substitutes with adequate skills to replace the injured employee. If that employee has specialized skills or is particularly productive, temporary labor costs may exceed the injured employee’s typical salary.

Opportunity loss — Your operation will experience downtime because of the injury. That means fewer products completed and fewer sales.

Blow to morale — Depending on the accident’s circumstances, other employees may now be worrying about their own safety in the workplace.

Administrative burden — Handling a worker’s compensation claim adds strain to your human resources and legal departments, and it also may mean being on the hook for additional billable hours if you use outside consultants.

Don’t let workplace injuries derail your business. Working with the expert risk managers at the Horton Group on developing a proactive strategy to prevent on-the-job injuries can help protect against direct and indirect costs that can cripple even the strongest manufacturer.

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.