Introduction
An accident is an unexpected occurrence that results in person injury or death. Accidents in the workplace or industry result from so many aspects of processes and operation ranging from simple machines to complex ones. A worker who operates a machine must have enough knowledge on machine operation parameters and maintenance techniques to ensure safe use and production. There are rules and observations that are made by the company management about the working conditions of a certain area or department. The same will help in cutting down the risks involved in any production line. However, some accidents occur in a way that was not intentional by the affected party, and this does not fall into the category of safety and health precautions of the factory. In such cases, no is to be blamed for the happening, and this would concern the management in any situation. The impacts of accidents range from minor injuries to serious ones and including death. It does not matter the kind or the magnitude of the accident, what matters is that it is an accident, and it has occurred. Apart from the injuries and other physical impacts of the accidents, there are other parameters that are hard to realize at the onset of the accident. One of the major one concerning the organization goal is the cost of the accident. The cost of accident refers to the financial impact of the accident on production and profit. Obviously, it is evident that when the number of workers reduces, the production goes down while the gains tend to increase. That is not always the case. When an accident occurs, the cost that a company incurs falls under either direct or indirect costs. This report is looking at the various types of costs that are involved in the effect of accident occurrence. A critical analysis of both direct and indirect cost parameters are also considered in details (Dharmapala and Hoffmann, 12)
Costs of Accidents
Direct Costs
These are costs that are directly related to the cause of the accident. These include medical costs, property damage, emergency services and funeral costs. The same costs are met immediately without any delays because of their magnitudes. Directs costs are always felt and implanted first before the indirect costs.
Medical costs
These are the costs associated with hospitalization, medical and rehabilitation of the injured party. The costs correspond to the expenses incurred and those projected for medical care provision to the injured or the sick worker. This heading also includes the costs of transportations, medications, medical personnel, and medical equipment and administrative that is involved in the accident scene. The victim of the accident may at times be responsible for the medical expenses that are covered by the occupational health and safety plan if they have not been prescribed by the medical practitioner and the accident has not been declared an occupational injury. The expenses here will include; medical equipment, medication, and healthcare.
Sometimes the private insurance companies are responsible for the expenses incurred. It happens in a situation when the employee is fearful of the impacts of declaring the occupational injury. For instance, for a worker who has a back injury in the work place may decide to see a chiropractor and assert that the accident occurred at home. The fees will be assumed indirectly by the employer and the employee via their health insurance deposits.
Cost of damaged property
This is the damage that is caused to the company’s tools, machines, and other properties. The cost that will be met here includes; the repair costs, replacements costs, cleanup costs, and the value of damage that is caused to affected goods. To estimate these costs, a survey has to be conducted in a company through the use of questionnaires. In other circumstances, the data that is from the national department is used. However, there is a controversy that some of the costs are direct while the rest is indirect. The major share of the damage is usually covered by the insurance companies taken by the company while another is met by the company itself. Therefore, the cost of such damage is usually assumed by the subject company through their insurance premiums.
Emergency services
These are costs that are incurred in attending the accident scene and all the situations involved in the effect of occurrence. Among these costs are firefighting services, and police. The same costs are assumed by the neighboring community that took part in the event. To calculate such costs is difficult and the estimates from other studies are used instead. An ambulance transportation may be assumed to be part of medical costs and the employee takes the responsibility when an accident happens at a workplace (Brody et al., 10)
Funeral costs
Some of the accidents and diseases that occur at the work place are fatal. The same will require expenditure on the funeral coverage which will be sorted at a later date. In this case, the real cost will the organizing of the funeral event at an earlier date than expected. In economics, the following formula is used for estimating the costs involved in a funeral.
FC=FC1- FC11+r1
Where,
FC = premature funeral costs
FC1 = funeral costs incurred at date one (date of death)
r=real interest rate (this is the nominal interest rate that is corrected for inflation)
n= the number of years of the life lost basing on the victim’s life expectancy.
All these costs are assumed by the family of the dead. It worth necessary to note that the person who makes payments may receive partial compensation as death benefit (Brody et al., 14)
Indirect costs
These are costs associated to the lost opportunities of the injured worker, his/her family, the employer, the community and the co-workers. They are not essentially related to treatment and repair costs of the injury created by the accident. These include; productivity costs, salary costs, reputation costs, administrative costs, employee benefits, and household costs (Brandsberg-Dahl, 32)
Productivity costs
This is the component main effects of occupational injuries in a company. When there is an occurrence of an accident, the stopping or slowing of the production because of property damage or injury caused affects the worker’s physical integrity. The ways in which productivity losses are experienced include the following. Firstly, it is the productivity of the victim on the day of accident and that of other workers who came to assist the injured worker. Secondly, is the reduction in productivity due to the damage of property and that of the worker who is absent from the labor market. Another loss in productivity is that of the injured worker who is returning for work and that of the injured worker on simple temporary assignments. Lastly is the productivity reduction in the process of replacing the worker. Most losses are experienced in a firm that is involved in line production. In this situation when there is a bottleneck in one part, the rest of the subsequent steps delays or stops. The cost of productivity can be obtained by carrying out a survey the factory or measuring directly via determination of value decreased in production (Brandsberg-Dahl, 34)
Salary costs
The salary cost may rise during and after the occurrence of an injury. During the injury, the costs involved is the variance between the income replacement and the by the worker and the net income in the earnings deficit that is stood by the worker. Another perspective is the change in the employee’s career path due to injury. This will create an effect in the community. The low pay of the employee will lead to a reduction in government tax revenues.
Employee benefits
If the employee gets an occupational injury he/she will be exempted from the contribution for pension plans. In this regard, the employee also loses other benefits such as career development and training. Some costs can be assumed by the community when the worker is no longer contributing to pension plans.
Household costs
The occupational injuries have a great impact on the employee’s ability to perform the household duties. Such include maintenance, house cleaning, cooking, etc. These expenses are met by the injured party and at times the occupational health and safety plan supports it.
Administration costs
These costs are mainly borne by the subject companies. These costs include the following; costs incurred during the investigation of the accident, cost of compensating the board, costs of private insurers, cost of recruiting a new worker and the cost of training the new employee. In these cases, a survey is needed to investigate the costs involved.
Reputation costs
The occurrence of accidents in a company may create a negative impact on the parties involved. In the case where the media is involved the employer may find it hard to recruit new employees. Similarly, the seriously injured employee may have trouble finding a new job (Gavious et al., 47)
Work cited
Gavious, Arieh et al. "The Costs of Industrial Accidents for the Organization: Developing Methods and Tools for Evaluation and Cost–Benefit Analysis of Investment in Safety". Journal of Loss Prevention in the Process Industries 22.4 (2009): 434-438. Web.
Brandsberg-Dahl, K. "Comments On “Major Accidents in Process Industries and an Analysis of Causes and Consequences”". Journal of Loss Prevention in the Process Industries 14.1 (2001): 83. Web.
Dharmapala, Dhammika, and Sandra A. Hoffmann. "Bilateral Accidents with Intrinsically Interdependent Costs of Precaution". SSRN Electronic Journal n. pag. Web.
Söderqvist, A., T. Rundmo, and M. Aaltonen. "Costs of Occupational Accidents in the Nordic Furniture Industry (Sweden, Norway, Finland)". Journal of Occupational Accidents 12.1-3 (1990): 79-88. Web.
Brody, Bernard et al. "Real Indirect Costs of Work Accidents: Results from Our New Model". Journal of Occupational Accidents 12.1-3 (1990): 99. Web.
