X-Plain Preventing Injuries at Work Through Ergonomics - Cost-Benefit Analysis Reference Summary

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1 X-Plain Preventing Injuries at Work Through Ergonomics - Cost-Benefit Analysis Reference Summary Introduction Ergonomics is the science of designing a safe, comfortable, and highly productive workplace. Work stations designed without considering ergonomics can lead to fatigue, poor work performance, and injuries. This reference summary explains workplace injuries, the direct and indirect costs of those injuries, and illustrates the cost -benefits of preventing injuries at work through ergonomics. Injuries Workplace injuries can happen in two ways. They can happen fast at a specific point in time, or they can develop over a period of days, months, or years. Injuries that happen at a single point in time, are called acute injuries. Examples of acute injuries include: Slips, trips, and falls Lacerations Fractures, and Sprains or strains that occur quickly When people talk about injuries, they are often referring to acute injuries. Many times, however, problems build up 1

2 over a longer period of time. These are called cumulative injuries, or cumulative trauma, or work-related musculo-skeletal disorders. Examples of cumulative injuries include: Carpal tunnel syndrome Trigger finger Tennis elbow Tendonitis Computer headaches Low back strain, and Other similar conditions Injuries that happen at work can cause problems for both the employee and the employer. Impact on Employees Employees who are injured may have to deal with limitations in both their work lives and their personal lives. Injured employees may encounter problems at work that include: Pain and discomfort Lower productivity Restrictions on job duties Lower morale Increased stress, and Possible permanent disability and loss of earning power On-the-job injuries also affect employees personal lives. They often limit non-work activities and can diminish interactions with family and friends. Overall, employees are likely to experience a lower quality of life following an injury. Employer Costs Expenses that the employer is responsible for as the result of an injury can affect the company s bottom line in many ways. 2

3 On-the-job injury costs can be classified into two categories: Direct Costs, and Indirect Costs Direct costs are expenses that are immediately associated with the injury. Direct costs for employers may include: medical expenses, workers compensation payments, disability payments, and legal services. Indirect costs are expenses that are not an immediate result of the injury, but are associated with the aftermath of the injury. Examples of indirect costs are: Administrative time dealing with the injury and medical care Wages of the employee on medical leave Costs for training a new or temporary employee Losses in productivity Poor quality of products or services Raises in insurance costs It is common for employers to only consider direct costs of an injury when doing costbenefit analyses. Indirect costs, however, can have a big impact on the bottom line. Let s look a bit more closely at some of these indirect costs. Wages of the employee on medical leave When a worker is injured, the employer must continue to pay for wages even when he or she is away on medical leave, at a doctor s appointment, or undergoing rehabilitation. The employer is therefore paying wages to an employee who is not working. This is in addition to the wages being paid to the replacement or overtime worker. The employer is paying two people to do one job. 3

4 Training a new or temporary employee When an injured employee is absent from work, a new or temporary employee must be hired and trained to do the job correctly. This costs the employer wages for the individual who is doing the training. It also costs the employer wages for the human resource employees who are searching for, interviewing, and hiring new or replacement employees. Losses in productivity When either an acute or cumulative injury happens, it is often necessary for several people to stop work to deal with the situation. Such disruptions of normal operations will result in lost productivity and reduced profitability for a company. Additionally, productivity may suffer while a replacement worker is filling in for an absent experienced worker. Because the replacement worker may not be familiar with the required tasks, he or she is likely to work at a slower, less efficient pace. Likewise, injured workers may return to work on restricted duty. The consequence is again less product manufactured or less service delivered, resulting in reduced profitability. Poor quality of products or services Replacement workers may also be less skilled at the job so that products or services may be of reduced quality. Inferior products may need to be discarded or re-worked, wasting raw materials and energy and costing unnecessary wages. Inferior products or services can cause a company to lose consumer loyalty and trust, resulting in serious consequences on the bottom line far into the future. 4

5 Scenario Let s look at an example of the direct and indirect costs associated with a common work-related cumulative injury. Max earns $20/hour in wages and benefits assembling widgets. As part of his job, Max must twist his back to reach widget parts that are located in a box beside him. For some time, Max and his coworkers have complained to their supervisors about back pain and have suggested moving the parts box or doing something to avoid the repetitive twisting and lifting. Unfortunately, the supervisors have not responded to the complaints or to the suggestions. Max s back has been getting progressively worse for several weeks. Finally, the pain reaches a point where he has to stop work in the middle of his shift. The rest of the assembly line is also forced to temporarily stop production. Max is taken to the local clinical facility to see a doctor who says Max should rest at home for at least a week. The doctor also says that when he returns to work, Max should be on restricted duty and not do jobs involving twisting activities for at least a month. Clearly Max s work life and personal life have been seriously disrupted because of his injury. To figure out how much Max s injury will cost his employer, we must consider both direct and indirect costs. Let s look at direct costs first. The direct costs of Max s injury include: Doctor s office visit = $200 Back X-rays = $350 Pain medication = $50 Additionally, the cost of these services may increase the company s insurance rate by an unknown amount. The total direct costs = $600 5

6 Now let s look at the indirect costs associated with Max s injury. Some of the indirect costs include: Wages for the personnel accompanying Max to the doctor s office at $25 an hour for 4 hours = $100 Human resources wages while finding and interviewing Max s substitute at $35 an hour for 8 hours = $280 Drug screen for the replacement worker = $95 Replacement worker s wages at $18/hour for 40 hours = $720 Wages of an employee to train Max s replacement at $20 an hour for 8 hours = $160 In this example, the total of these indirect costs is $1,355. Additionally, there are indirect costs that are significant, but difficult to quantify with a single number. These intangible expenses include the costs of: Production slowing down when Max stopped the assembly line Slower assembly rate as the replacement worker learns the skills of the job Reworking any widgets the replacement worker assembled incorrectly Reduced customer satisfaction and loss of reputation with poorer quality of products The total cost of Max s injury is the sum of the direct and indirect costs. In this simple example of a cumulative back injury, the costs are estimated to be: $600 + $1,355 = $1,955 + Unknown amount for intangible costs We can see from this example that the indirect costs are much higher than the direct costs. Research studies have found that indirect costs can often amount to four times the direct cost of an injury. It is important to remember to include indirect costs in any cost-benefit analysis for a workplace injury. If Max s company had a 3% profit margin on the sale of its widgets, $65,167 in sales would be needed to pay for Max s relatively minor injury. Nationally, the total economic 6

7 burden of workplace injuries and illnesses is estimated to range between $125 billion and $155 billion annually. In this example, Max and his coworkers had complained to management about back pain, and had offered suggestions on how to adjust the work space. Had Max s supervisor listened more closely to the complaints and suggestions, and taken action to improve the job, the injury may have been avoided. The costs of the injury could also have been avoided. Some things the manager could have done to prevent this injury and its consequences include: Move, elevate, or tilt the parts box so that less twisting was required to reach the part, Implement a schedule to rotate workers to less strenuous jobs, Install an adjustable table, or Mount a lifting device Any of these solutions would have been less expensive and less disruptive to the work place than the injury that happened. If the managers had listened to the employees immediately, and considered simple ergonomic solutions, the injury may have been avoided. It is important to remember that employees know their job better than anyone. They usually know what needs to be improved and what will make their jobs more efficient and less likely to result in injuries. Good supervisors respond positively to employee complaints and suggestions. The example discussed concerned assembly line work, but ergonomics is equally relevant to offices, service jobs, and every other work setting. 7

8 Summary Ergonomics is the science of designing a safe, comfortable, and highly productive workplace. Work stations designed without considering ergonomics can lead to fatigue, poor work performance, and injuries. There are two kinds of workplace injuries, acute and cumulative. There are two types of costs that employers must deal with when an employee is injured, direct costs and indirect costs. Indirect costs tend to be much larger than direct costs. Also, not all indirect costs are easily quantified into a single number. By avoiding injuries, employers and employees can avoid pain and suffering, can save money, and can stay competitive in today s marketplace. Good Ergonomics = Good Economics 8