Most of us are familiar with the tragedy of the Titanic. Or we at least understand the concept of a ship hitting the underwater, hidden bulk of an iceberg. That concept is the same as the hidden costs of an employee injury. A business is running along in a smooth ocean, when it encounters an iceberg (an employee injury). The business thinks it has navigated its course well and will avoid any damage. However, unbeknownst to them, they strike the hidden bulk of the iceberg (hidden costs). You know how the story goes from there… 

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In this article I am going to cover costs related to injuries, including some that you may not have experienced or thought of. Along the way, I may just convince a few doubters of the importance of safety! 

Note: I want to clarify the purpose of this article - we are only going to look at this from a business perspective and the potential impact to the business. I want to be clear that the impact of an injury to an employee ranks first and the business impacts and cost are secondary. 

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Direct Costs

Generally, the direct costs of an injury is related to medical payments and any OSHA violation payments.  Below are some, but not all, direct costs associated with an injury. 

Worker’s Comp Medical Payments

The payments to the medical provider may not coming out of your pocket, but we all know that an insurance company will not make multiple large medical payments without increasing the premium or terminating the coverage. Here are a few ways a restorer will be directly financially impacted: 

• Worker’s Comp deductible
  Most everyone will have a deductible and it’s always a juggling act of how low you want your deductible to be versus how high your premium is. Just like auto insurance, make sure you understand these numbers. 

• Worker’s Comp Premium May (Will) Increase
  Again, just like auto insurance, we all know what happens when we have accidents. Premiums increase and sometimes policies are cancelled!

Lost Employee Wages

This falls outside of the medical payments topic I just mentioned; however, it directly impacts an injured employee. Unless an employee has been injured before, they may not realize that they won’t get their full wages when the doctor doesn’t clear them to return to work. For instance, in my home state of Florida, workers compensation only pays an employee 2/3 of their regular wages when they are out of work. And even then, the injured employee will not get their first 7 day’s wages unless they are out for more than 21 days. This can vary by state. (1)

Equipment/Vehicle Costs

If the employee injury is the result of an auto accident or equipment is damaged during the incident, suddenly there is another layer of financial burden. For instance, auto insurance deductibles and/or repair cost of vehicle. There may be the cost of a rental replacement vehicle. 

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Now, if you really want to get scary, what if an auto accident also resulted in damage/injury to others? There may be (will be?) legal fees to defend a suit brought against you. Again, even if the insurance carrier is paying these fees, see the premium increase topic covered next.

Worker’s Comp Premium Increases

Finally, after you have worked through all the immediate impacts of any injury, your worker’s comp carrier is only going to cover so many costs before increasing your premium. As mentioned earlier, your coverage may also be dropped.

Indirect costs

Now let’s take a look below the water surface and see just how big the iceberg is! 

Lost Productivity

The U.S. Department of Labor reported in 2023 that over the period of 2021 through 2022, there were 2.2 million cases requiring employee days away from work and required an average of 10-days away from work. (2) Can your small restoration company maintain productivity for that period of time? What if it’s 20 or 30 days? 

This statistic is just the employee’s lost productivity; it does not cover the need to replace the Tech while they are out of work or reassigned. That can include:

• Hiring another tech or bringing in a temp
• Overtime for other existing techs
• Manager/owner steps in and is taken away from marketing, sales, client meetings, etc.

Impacts to employee morale

I personally have seen a shift in employee attitudes towards the risk of injury. I believe employees are more concerned now about injury to them or their co-workers than in the past. Sure, we will always have some who are 10-foot tall and bulletproof; however, that attitude almost always changes with time and experience. A serious injury will have a strong impact on employee attitudes and morale.

Likewise, employees and the general public want more information than was available a decade or so ago. I just read a news feed about a fatal construction accident at my local airport. Of course, the employer was named and the news agency promised to dig deeper into the situation. Now picture your company facing the media onslaught and demand for information by employees. This fatality will have an immense impact on the morale of the company!

Impacts to Public Image

Much like I just mentioned, imagine seeing one of your trucks or vans, with your logo prominently displayed, on a local news feed while a reporter describes a worker injury and promises the viewers that there will be an in-depth investigation and many questions asked. This never paints a good image for the company!

Sometimes there are additional spin-off results from an injury, such as:

• Employee complaints to OSHA or additional information arising from OSHA interviewing employees post-accident.
• Employee complaints to the media, resulting in TV news coverage or local Internet news articles. 

By the way, do you realize the public or your client can look up your violations online? OSHA maintains a database of citations that is publicly accessible. (3) This can also negatively impact your ability to bid on commercial work, since many bid requests these days ask if a company has had OSHA violations.

OSHA fines

OSHA just increased their fine amounts in 2024. (4) While the minimum amounts may not force a restorer into bankruptcy ($1,190 per serious violation), when you consider the maximums (over $16k per violation) and the ability to stack up violations, the potential financial impact from fines can be significant. To put this in another perspective, think about how many jobs you have to perform to use the profit to cover you fines! (See the Resources section on profitability if you really want to go down a rabbit hole.) 

Increased Experience Modification Rate (EMR) 

If you are not familiar with EMR, do some research or contact me. Then contact your Worker’s Comp Carrier and get your EMR. Did you know that an EMR over 1.0 can result in an increased premium? (5) This truly is a case where safety pays – actually, in this situation, a bad safety records costs you more.

Compounding this cost is the common requirement to report our EMR on bids. Like it or not, EMR has become the gold standard for judging a company’s safety record. Like it or not, that’s how some clients are going to judge you. So, an EMR over 1.0 is going to result in a less favorable view of your safety by potential clients.

Summary

Nobody wants to see an employee injured; however, restorers need to understand that there more than meets the eye to injuries. The hidden, indirect costs are literally like the huge underwater part of an iceberg. They are sitting there unseen, just waiting for the next ship to come by. Don’t let hidden injury costs turn your restoration business into the next Titanic!  

Resources

Occupational Safety and Health Administration, Estimated Costs of Occupational Injuries and Illnesses and Estimated Impact on a Company’s Profitability Worksheet. https://www.osha.gov/safetypays/estimator

References

1. Florida Department of Financial Services, MyFloridaCFO, Employees, Benefits Available to Injured Workers. https://myfloridacfo.com/division/wc/employee/benefits-available-to-injured-workers#:~:text=If%20your%20doctor%20says%20you,a%20statewide%20maximum%20reimbursement%20amount.
2. U.S. Department of Labor, Bureau of Labor Statistics, News Release USDL-23-2359, November 8, 2023. https://www.bls.gov/news.release/pdf/osh.pdf
3. Occupational Safety and Health Administration, Establishment Search. https://www.osha.gov/ords/imis/establishment.html
4. Occupational Safety and Health Administration, Enforcement Memos, 2024 Annual Adjustments to OSHA Civil Penalties, January 8, 2024. https://www.osha.gov/memos/2024-01-08/2024-annual-adjustments-osha-civil-penalties
5. AmTrust Financial, Blog, Small-Business, How Experience Modification Rate Impacts Workers’ Comp Premiums. https://amtrustfinancial.com/blog/small-business/how-experience-mod-impacts-workers-comp-premiums#:~:text=The%20final%20rate%20is%20based,premium%20rates%20will%20be%20higher.