COST OF ACCIDENTS

The accident prevention work at first started for humanitarian reasons and even though humanitarian aspect of accident prevention still continues as a driving or motivating force apart from Legal view point, the accidents have also to be prevented from economical point of view, in the present scenario of global competitions, as these seriously affect the production, productivity, efficiency and morale of the people. Serious attempts have not been made by various industries to assess the effect of these accidents and determine the cost of accidents. Even though accurate data about the cost of accidents is not available and the labour costs, material costs, medical cost, compensation costs are not segregated under a separate accident cost heading, these always get reflected in the accounting records of the industry. ASSESSING COST OF ACCIDENTS: It is not intended that every organization should know, from the break down of total cost figures, the precise costs of accident, what is needed is a method of estimating total accident costs which would be sufficiently reliable, to serve as a basis for managerial decisions. Cost of accident can be classified under two broad headings: 1. DIRECT COSTS: Compensation paid and medical expenses. These are apparent costs of accidents and data can be easily collected. 2. INDIRECT COSTS: Arriving at even the estimated costs of accidents, requires detailed and close analysis of many factors also and not just the compensation paid and medical expenses incurred. Even a smallest accident has some indirect or hidden costs, which eat into profits. Some of the important indirect cost factors which enter into the cost of every accident are: COST OF TIME LOST BY OTHER EMPLOYEES. COST OF TIME LOST BY SUPERVISORS/MANAGERS/EXECUTIVES. COST OF DAMAGE OF EQUIPMENTS/MACHINES. COST OF INJURED PERSONS DECREASED OUTPUT. COST OF LOW EMPLOYEE MORALE. OVERHEAD COSTS.

COST OF TIME LOST BY OTHER EMLOYEES: The time lost by other employees who stop work out of curiosity, sympathy, fear or to assist the injured person at the time of accident can often amount to a more sizeable figure than would be revealed by a hasty look. Too often we tend to dismiss this is being of little consequence. Yet in the cost of an average accident such an interpretation can just be any where from half an hour to few hours and can involve from one to ten or even more employees. The total wage out lay (and consequent loss of production) involved will amount to a figure well enough worth adding to the accident cost analysis. In serious and fatal accident cases, it is of course of far greater importance. In almost all such cases it seriously upsets the departmental production for quite long period. COST OF TIME LOST BY SUPERVISORS / MANAGERS / EXECUTIVES: These time lost are due to assist the injured employees, to investigate the cause of accident, to arrange for someone else to take over, to train the new employees and to prepare the necessary reports, would add up to a considerable amount. COST OF DAMAGE OF EQUIPMENTS / MACHINES:

The cost due to damage to equipments, machines, tools and material resulting in some of the accident cases are also to be taken into account as these form a part of the cost of accident. This is particularly significant taking into account the large number of no injury cases or dangerous occurrences often resulting in damage to machineries, equipments and materials. COST OF INJURED PERSONS DECREASED OUTPUT: Another factor to be taken into consideration is the cost of paying full wages to the injured employee after his return, even though for sometime he may not be able to perform his normal job with the same efficiency. This is an important factor generally overlooked in the accident cost appraisal. Just as the industry has to lose in the inability of the replacement to meet the injured persons production standard, so also must it suffer a loss, until later is back in good health and full capacity and capability once again. Only in rare cases does this happen immediately, regardless of the period, the injured person has spent in recuperating. COST OF LOW EMPLOYEE MORALE: We must also add the cost that occurs in consequence of the excitement, resentment or low morale of employees in that particular department due to accidents. In variably when an accident occurs, no matter how small, there will be o drop in the morale of other employees. Sometimes this may be regained in a day but often it takes more time. It results invariably in drop in production, efficiency of group or even the whole department until the accident is somewhat forgotten and moral regained. OVERHEAD COST: The overhead costs of accidents in so far as the general over heads are concerned, are also to be added up to the total cost. This involves the expenditures, which continue to be incurred while the injured employee, his colleagues, and supervisor remains un-productive. Following indirect costs of accidents can also be considered, while calculating the total cost of accident: Cost Over time / Acting. Cost of Training / Induction given to new worker/s, put in place of injured one. Cost of low output by new worker/s. Cost of suspension of work by statutory authorities. Apart from the above, the following costs, which can never be measured in terms of money, but has larger implications, so far industrial relations and reputation of the industry is concerned: Harassment to the family members and friends. Harassment to Occupier / Manager of the Industry. Cost of loss of reputation in the market and society. The study of Cost of Accident shows that the Indirect cost of about 5 to 10 times more than the Direct Cost, Thus:

DIRECT COST: INDIRECT COST:: 1: 5 TO 1 : 10