Ergonomic Economics

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 True Cost of an Employee Injury

Step 1
Determine Your Company's Direct Costs:
Direct costs are costs of all insurance claims for any injury or illness.		 $___________________
Direct Costs (DC) =
Sum of all insurance claims.
Step 2
Determine Your Company's Indirect Costs:
Indirect costs are those needed to cover the costs of hiring temporary workers, additional training, etc.  OSHA has developed a formula to estimate indirect costs, based on a company's direct costs.  Multiply the direct costs by the cost multiplier in the chart below.
If the Direct Costs are:
     $0-2,999
     $3,000-4,999
     $5,000-9,999
     > $10,000		 Cost Multiplier is:
4.5
1.6
1.2
1.1
$___________________
Indirect Costs (IDC) =
(DC) x (CM)
Step 3
Calculate Your Company's Total Costs:
Total Costs are obtained by adding your company's direct costs to its indirect costs.		 $___________________
(DC) + (IDC)
Step 4
Calculate Your Company's Profit Margin
Simply stated, the Profit Margin is a ratio of the net profit divided by the total sales.  For example, if items sold made $105 but costs $100 to make, the net profit is $5. Profit margin is then obtained by dividing $5 by $105, which is 4.8%.  Smaller rapid growing companies often have profit margins of 10 or 20%.  Larger firms often aim for 2 or 3% a year.  For Associations or Government Agencies, use a 5% Profit Margin figure.		 ___________________%
Profit Margin (PM) =
Total Profits / Total Sales
Step 5
Determine the True Impact on Profitability:
Divide the Total Cost (TC) of the injury by the Profit Margin (PM). This figure represents the sales required to pay for the occupational injury or illness.  In other words, this is the amount of additional sales needed to maintain the current profit margin.		 $___________________
Additional Sales Required to Maintain Profit Margin
(TC) / (PM)
Analysis
Example:
Suppose an employee had surgery for Carpal Tunnel Syndrome and the insurance claims total $10,000.  The Indirect Costs can then be estimated at $11,000 and the Total Costs become $21,000.  If we assume a profit margin of 5%, then the true impact of this employee's surgery is $21,000 divided by 5% or $420,000, which is the estimated additional sales needed to maintain this company's 5% profit margin.

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