NEBOSH-IGC1, Element-1, DIRECT AND INDIRECT COSTS, INSURED AND UNINSURED COSTS
THE BUSINESS CASE FOR
HEALTH AND SAFETY
When an accident take place there two types of losses that an organisation may have to face:
Direct costs: the measurable cost that are directly associated with accident.
Examples
of direct costs:
•
Fines in the
criminal courts.
• Compensation payable to the victim,
which is likely to be met by insurance
cover and will therefore
result in an increase in insurance premiums.
•
First-aid treatment.
•
Worker
sick pay.
• Repairs to, or replacement of, damaged
equipment and buildings.
•
Lost or damaged product.
• Lost production time
whilst dealing with
the injury.
•
Overtime to make up
for lost time.
• Costs associated with
the rehabilitation of the injured worker and their return to work.
Indirect costs: the cost which arise indirectly as a consequence of the event and not easy to quantify precisely and also hard to identify.
Examples
of indirect costs:
• Loss of staff
from productive duties
in order to investigate the
incident, prepare reports, undertake hospital visits,
deal with relatives, attend court proceedings.
• Loss of staff morale (which impacts on productivity, quality
and efficiency).
• Cost of remedial action following an investigation, e.g. change of process or materials and/or the introduction
of further control measures.
•
Compliance with any enforcement notice served.
• Cost of recruiting and training temporary or replacement labour.
• General difficulties in recruiting and
retaining staff as an indirect
result of the accident.
• Loss of goodwill
of customers following delays in production and fulfilling orders.
• Activation of penalty
clauses for failing
to meet delivery dates.
•
Damage to public image and business
reputation.
• Damage to industrial relations, perhaps leading to industrial action (e.g. strikes).
Some of the costs listed above are Insured and others are Uninsured in both cases Direct as well as Indirect Costs. As categorised below...
Insured Costs:
•
• Compensation
paid to workers
• Medical costs
• Legal
costs (civil claims)
• Damage to industrial relations, perhaps leading to industrial action (e.g. strikes).
Uninsured Costs:
• Production
delays or down time
• Loss
of raw materials due to accidents
• Accident
investigation time
• Criminal
fines and legal costs
• Sick
pay for injured workers
• Overtime
to make up for lost production
• Hiring
and training new employees
• Legal costs (civil claims)
• Loss
of business reputation
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