Numbers Do Not Lie When Proving Safety First

How much money does your company spend on safety? This seems like a simple question on the surface. One would think there would be a column in the company spread sheet that accurately reflects this number.

As a consultant who is called on to gather this information for attorneys, I can report many companies need improvement in this critical area of accounting. If ever sued for negligence this will be a number to have close at hand. It should be an accurate number that reflects between 3-5% of gross sales. This is a base figure that can be lower if the company is in a very low risk category. It can also be higher if the company is in a high risk undertaking. [WCx]

I can see the jaws dropping from here. Yes this is a number that will give a solid answer when you are asked to prove that you put safety first.

Actuaries have crunched the numbers from a wide variety of company types to arrive at a figure that represents what safety first firms use. This may well be the first of subpoenaed items a Plaintiffs lawyer will request.  The number supplied may well decide if he takes the case. If numbers have not been tracked, giving an estimate may not produce a  solid negligence defense.  Just a number will not suffice, they will want the accounting.

This amount is probably being spent without your realization. The first mental calculations may have you scratching your head and thinking.  “Well I have the first aid kit, PPE and …… WHAT ELSE?! Oh no I am in trouble.”

Take a real look at what should have been tracked and see if 3-5 % is not a reasonable number.

Employee safety training will most likely be the largest cost. There should be a column in the books that represents every hour of pay the hourly employees are in safety training. If a ten minute toolbox training is completed every day on a construction site or a manufacturing company holds daily stretch/exercise breaks for safety reasons, these are costs that count and add up fast. With the assistance of an accountant, add the cost of time for any salaried employee or supervisor directly involved with safety. If there is a dedicated safety director with no other duties, his entire salary should be in this column. Other employee safety costs may come from office employees who maintain the Haz-com program. There are many hours in maintaining MSDS sheets, chemical inventory, and ordering safety supplies.

There are costs most companies do not think of as being in the safety column. If there are supply water or electrolyte supplements for outside workers, this amount goes into the total.   Do not forget all first aid items, safety signage, and even motivational posters are fair items for this calculation.

Next look at items taken for granted:
Fire extinguishers and their annual care.
Emergency exit signage and back up lighting.
Annual maintenance.
If your company is in an area where icing is common the amount spent on salt or any other anti-ice chemicals is fair game.[WCx]

Each company spends on safety in a unique way. Take some time and add to this list any other obvious safety expenditures. You may have to be firm with the accountant as some may be less than excited about making this change. From experience, I can tell you it will be well worth the time and effort if this information is ever needed. In addition to the negligence defense this will provide, it will give you a valuable tool in calculating real time safety costs. You may also find this extra step has bottom line benefits. Take it from one who has done this forensically, it is much better to have it accounted as you go.

Also use our FREE calculators  to help your management team understand your true Workers' Comp expense and how it impacts your bottom line, as well as the annual revenue of your stakeholders.
Brian Hill is owner of OshaSure in Birmingham Alabama and has over 20 years as a workplace safety and risk consultant. Brian was previously a pilot for a major US airline and member of the company’s interdepartmental safety committee. He found his new career in safety after the closing of the airline in 1991. Brian has found the same passion he had for flying in assisting companies with safety, heath and risk issues.
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.


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