Employee health and safety programs are great cost savers for business operations. Being proactive in the wellbeing of your employees helps to keep your business running smoothly and will ease the financial burden that comes with illness and injury. Having these plans in place makes it easier for companies to establish the proper safety and health procedures from the start, without the need to address problems as they occur. There are several ways that you can measure the success through the return on your investment of these programs.
One statistic from OSHA shows that the average amount companies will spend on work-related injuries and illnesses ranges around $170 billion! These incurred costs will reduce company’s profitability and will make small businesses suffer, maybe even to the point of going out of business. On the other hand, businesses that establish health and safety plans have shown to reduce these costs by anywhere from 20%-40%. In order to compare and have an accurate measure of the return on your investment of health and safety plans, it is important to have data showing your costs before and after the programs have been put into place. The larger your business and the more employees you have, the more worthwhile these programs will be. Being able to track how many sick days the average worker takes, and how many work related injuries occur over a specified time frame, will be valuable information to consider when endeavoring to measure the ROI of a health and safety plan.
Productivity and Savings
There have been many case studies already conducted to determine the ROI of safety plans in the workplace. One example with Liberty Mutual Insurance argues that for every dollar they spent on safety in the workplace, they saved three dollars from that investment. Using that ratio of 1 to 3, you can see that if you scaled this study up to $5,000 being spent you could save $15,000. The more productive work environment will produce more revenue for the company.
OSHA has also gathered statistics on the cost of a medical claim for an employee. The problem is that within this cost there are hidden incurred costs. For a single medical claim for an injured employee, the upfront cost may range around $500 for the initial claim. In addition to that this claim will incur indirect costs over $2,000. So for one medical claim for an injured employee the company would suffer an overall cost of $2,500 or more. In order for the company to maintain a small profit margin, it would require sales revenue in the amount of $91,666 to recover the money spent on the employee’s medical claim. This data is based on a study conducted by OSHA and the National Council on Compensation Insurance.
In addition to saving money on medical claims, having a working environment that is safe and healthy promotes employee loyalty and confidence. This will reduce the amount of turnover creating a higher employee retention rate. The hiring process can be costly for most businesses. Time needs to be spent to conduct interviews to fill positions that currently are not producing work output. The better your employee retention rate is, the less time and money will be consumed in the hiring process. Defining how much it costs to hire a new employee will help determine how much you will save by retaining one instead. This is another way one could measure the ROI of a health and safety program in your business.
Promoting health and safety in the workplace will have many positive effects on your company. Measuring the ROI will need to be determined by your past expenses for illness and injury compared to your current expenses once these programs are put into place. This will be necessary to have an accurate measure as every business is unique in its workers compensation and the costs they will incur.
The writer, Nick Quinlan, is a blogger with a focus on business topics and looks for ways in which a business owner might increase their revenue: including through an effective health and safety program. If you need help starting or improving upon your existing program he highly recommends paying a visit to eCompliance.com. You can learn more about Nick on Google+.