LECTURE 4: COST OF

ACCIDENTS
COST IS THE ULTIMATE MEANS OF
CONVINCING PROJECT PERSONNEL ABOUT
NEED FOR SAFETY!!

Should safety be viewed altruistically or economically ?

 Introduction:

DIRECT COSTS (Easy to Measure &

Realize)

INDIRECT COSTS (Difficult to Measure)

 Real and Hidden Costs
What does an accident really cost?

?
DIRECT COST
SS Project

INDIRECT/HIDDEN
COST
 Direct Costs
Typically Insured Costs
Medical Expenses
Wage Compensation (indemnity)
Legal Defense
 DIRECT COSTS
Covered By Workers Compensation
Ambulance service
medical & follow-up treatment
hospitalization
medication
disability benefits - % of last wages
Losses covered by insurance – financial transaction

Direct Costs are well understood and

quantified with accuracy
What is Workers Compensation ?
A mandatory government run insurance scheme that
ensures compensation for workers who get injured in
the workplace.

The company pays the insurance premium based on

man-hours to be worked
 Workers Compensation
Premium in each country varies based on the
type of expertise

Based on overall safety record of the craft

Insurance payment period & terms in the state

Premium for an employer is based on state

rate and employer’s EMR (Experience modification
rate)
Experience Modification Rate & Loss Ratio
Experience Modification Rate (EMR) has strong impact
upon a business. It is a number used by insurance companies
to gauge both past cost of injuries and future chances of risk.
The lower the EMR of your business, the lower your worker
compensation insurance premiums will be.
EMR tends to be an evaluation of company’s safety record.
Loss ratio is based on claims made .vs. premium paid
Larger EMR higher the premium.
EMR is modified based on three year period not including
immediately preceding year.
Past year cases may not have been closed yet
INDIRECT /Hidden COSTS
Difficult to Quantify
1. Lost time of injured worker
2. Cost of lost time of other workers who stop
3. Cost of lost time of supervisory crew
4. Time spent by site medical crew/ Transport
5. Damage to equipment, tools, materials
6. Employee welfare/benefit cost.
7. Disruption to crew composition
8. Reduced worker productivity / Supervisor productivity
9. Idle equipment
10. Overhead cost
11. Administration cost / Legal costs
12. Company Image
 Hidden Costs
Uninsured Amounts
Paid by the employer
3 to 5 times greater than direct costs
Direct Costs
$

Hidden Costs
$$$$$
 Hidden Costs
Costs Of Lost Wages Includes medical
Paid To Injured treatment and time
away from work not
Employee
covered by insurance
Sick leave
Doctors visits
 Hidden Costs
Costs paid to other Includes those
workers not injured employees that stopped
work to watch, talk
about or to assist
injured.
Those employees
whose job is dependent
on injured worker’s
products or tasks to
accomplish their work
 Hidden Costs
Costs of damage to Repairs to any
material, property or equipment or property
damaged in the
equipment
accident
 Hidden Costs
Costs of overtime Including costs to make
necessitated by the up for lost production,
additional supervision,
accident
and additional operating
expenses
 Hidden Costs
Involve caring for the
injured person
Additional wages
Transporting injured to
paid to supervision
medical facility
Investigating accident
Getting operation
organized again
 Hidden Costs
Resuming to normal Instructing, training and
activities repositioning employees
May require hiring a
replacement employee
with all costs of hiring a
new employee
Diminished productivity
 Hidden Costs
Managerial or office Processing claims and
personnel related paper work
processing claims, Tending telephone calls
and communications
forms and any
related to incident
related paper work
Conducting interviews
and investigations
Attending Hearings
Uncovered legal costs
 Hidden Costs
Wages due to After employee returns
decreased to work, capacity is
diminished because of
productivity
restricted movement
Employee is nervous
and less confident
Employee spends time
discussing incident with
other employees
 Hidden Costs
Reduced Competitive Position Caused by delays
Increased operating costs
Rework time on damaged products
Increased cost of insurance
Unfavorable publicity
Civil penalties, fines, legal fees and time
involvement for violations
 Intangible Factors
Family Stress

Mental and Emotional Strain

Loss of Ability to Make a Living

 Danger Signs!
Indicators of Larger Problems
Near misses
Minor incidents
Serious Incidents
Property damage
Product damage
Equipment damage
Employee injuries
 Danger Signs!
Production is not at optimum
Profitability is reduced
Employee moral is diminished
Public image is damaged
Getting set up for the “big one”
Guard Against These Setups
Time Pressure
Vague Guidance
After Wake-up or Meal
First Time Evolution
Over-confidence
Distractive Environment
High Work Load/Stress
First Day After Time Off
Thank you
 Quiz (5marks)
Based o the first presentation,
write down a series of steps that
are used to control risks in
excavation works.