The direct and indirect costs of a workplace injury or illness can have a significant impact on a dealer’s bottom line. When you look at just how quickly those costs add up, it becomes clear just how well “safety pays” as you set your sights on achieving a zero-loss rate.
True or False?
A workers’ compensation accident costing a dealership $824,000 in direct and indirect expenses might require more than $27 million in sales to make up for the loss.
The answer very well could be true. But, before we dive into an example to illustrate this, let’s take a quick look at why the direct and indirect costs of a workplace injury or illness can add up so fast.
Let’s Look at a Dealer’s Really Bad Day
Let’s say Dealership ABC has a forklift (a powered industrial truck). But, it doesn’t have any safety training or safety policy concerning the operation of this forklift. An accident occurs when an employee who jumped on the forklift to deliver a heavy part to a service bay for installation slams into a car backing out of the service bay because the brakes failed.
The forklift driver’s leg gets pinned under the cage that surrounds the driver’s seat. Once he’s freed from the forklift, he’s rushed to the hospital where his leg needs to be amputated. He also sustained a concussion and broke a bone.
As a result of the accident, the part that was being delivered on the forklift (an engine core) slides off and knocks two big drums of oil, which rupture and spew oil all over the parking lot. The oil goes down the storm drain, which leads to a creek, and the dealership doesn’t have a spill-prevention plan in place at this time.
Hopefully, you can already see that the lack of safety training or a safety policy (not to mention a spill-prevention plan) is likely to have a negative, cascading effect on the total loss cost.
Just how costly will this accident be for Dealership ABC?
We collected some costs from previously published citations and examples. Let’s take a look:
Direct medical costs for the amputation ($96,003), concussion ($54,571), and fracture $54,856) for a total of $205,430, according to OSHA’s $afety Pays estimator
Indirect costs of $105,603 (this is where lost work time, replacement worker costs, pain and suffering, etc. come into play), according to the $afety Pays estimator
Multiple OSHA citations totaling $130,900 for:
- not ensuing that the operator had successfully completed powered industrial truck training (a serious violation of $5,500)
- for the driver not wearing a seatbelt (a $4,400 violation)
- for not ensuring that the forklift brakes were operating in a safe condition (a willful violation of $60,500)
- for not doing any pre-trip inspection on the forklift (another willful violation of $60,500)
Legal settlement of $350,000, which comes after the attorney for the injured employee reminds the dealership and its insurer of all the OSHA citations that constitute a mound of evidence that could be used to demonstrate the dealership’s negligence for not having a forklift safety training program and not inspecting the brakes or repairing them.
The Impact on Their Bottom Line
With Dealership ABC paying $824,000 in losses on this one incident alone, the impact on its bottom line could be quite staggering. If we assume the dealership has a 3% profit margin and it performs oil changes for $16 each, it will need to pull in $27.5 million to make up for this loss. So, this is one reason why safety pays and why the goal is to strive for zero losses!
Make Safety Pay With KPA
KPA clients have access to over 120 field consultants across North America who are available to deliver both on-site and virtual compliance support, as well as audit loss control services. Additionally, KPA’s Vera Suite software helps dealers manage their EHS, F&I, and HR programs in one comprehensive platform.
The combination of KPA’s software platform and deep industry expertise helps clients manage risk, streamline operations, and reduce costs.
If you have questions on how to determine the likely direct and indirect costs of workplace accidents and injuries and want tips on how to lower your IR and your EMP as you strive for zero losses, reach out to KPA today.