Many ergonomic improvements can be implemented with low capital expenditures.
However, when an ergonomic improvement requires a larger capital expenditure, cost can become a barrier to implementation.
In these situations, it’s important to make a compelling business case for the ergonomic improvement using cost justification to prove a return on investment (ROI).
To help quantify the value of ergonomics, the Washington State Department of Labor & Industries developed a very useful cost-benefit calculator. The calculator allows you to compare up to three ergonomic improvement options, and estimates the benefits and payback periods for each option.
Once you’ve clearly defined the business case for the best ergonomic improvement, you are more likely to get the resources you need to move the project forward.
Step-by-Step Directions
The ergonomics cost-benefit calculator is intended to be used under the following conditions:
- Your company directly pays the costs of workers’ comp claims (i.e., self-insured).
- You have an active ergonomics program and you pretty much know what you’re doing.
- You’re considering implementing one or more ergonomics solutions to address specific problems (e.g., back and shoulder injuries from lifting).
- You’d like to evaluate a few different options.
- You’re expecting a payback period of less than one year. (The payback period is the time that it takes for the benefits of a solution to pay for the costs of implementing it. Most ergonomics solutions have a payback period of less than one year.)
(Scroll to the bottom of this section for a more complete listing of the calculator’s assumptions)
Step 1: Input Worker’s Comp
The first step is to enter the number of employees affected by the ergonomic improvement, their average hourly salary and each injury associated with the job. The rest of the spreadsheet will be calculated for you.
An example is pictured below:
Step 2: Input Solutions
Step 2 is to input details of the solutions you are considering as well as the estimated effectiveness and productivity improvements of the proposed solutions. The calculator allows for up to three options.
An example is pictured below:
Step 3: Benefits
Estimated benefits from the solution options that you input are calculated automatically and presented in the ‘Benefits’ tab. Total estimated annual savings are the potential savings the first year after implementing that solution option. Estimated savings over three and five year periods are also calculated. The cost of implementing the solution is not subtracted out (i.e., these are not net savings). Estimated net savings are shown on the ‘Payback’ tab.
Step 4: Payback
Total costs, total benefits, and net benefits for the first year are shown on this tab. The payback period is calculated, and shown graphically for each option. Most ergonomic solutions have payback periods of less than one year. If you find a payback period that is significantly greater than one year, you should use a cost-benefit calculator that allows you to factor in depreciation and a discount rate.
Calculator Assumptions
Assumptions are based on 250 ergonomics case studies reviewed by the Washington State Department of Labor and Industries.
Intended Use:
- Self-insured company.
- Implementing solution(s) in defined area (i.e., not a company-wide program).
- Company has active ergonomics program with all recommended elements and solutions will be effective.
- Can compare up to three options.
- Expecting payback in less than one year (i.e., not considering depreciation, discount rate).
Injury costs:
- Average costs from 2004 SHARP report on WMSDs.
- Average costs used instead of actual company costs because recent injuries may not have incurred eventual total
- Cost of claim.
- Three years of experience used to be consistent with workers’ comp.
Indirect costs:
- From OSHA e-tool: http://www.osha.gov/SLTC/etools/safetyhealth/mod1.html
- Less expensive claims have proportionally higher indirect costs.
- $0 – $2,999 = 4.5 x claim cost
- $3,000 – $4,999 = 1.6 x claim cost
- $5,000 – $9,999 = 1.2 x claim cost
- $10,000+ = 1.1 x claim cost
Effectiveness of solutions:
- Based on Oxenburgh’s (1991) assumptions & review of 250 case studies of ergonomics interventions.
- Effectiveness estimates were taken from the low end of the range to be conservative.
- Solutions that eliminate hazard (e.g., lift equipment, semi-automation) 70% effective.
- Solutions that reduce level of exposure (e.g., adjustable workstations, reduced weight of lift) 40% effective.
- Solutions that reduce time of exposure (e.g., job rotation) 15% effective.
- Solutions that rely on employee behavior (e.g., training only, team lifting) 10% effective.
- Percentage reduction in claims = percentage reduction in claims costs = percentage reduction in indirect costs.
Productivity benefits:
- Employers pay for 2,000 hours per year per worker, at $x.xx per hour.
- Workers are not 100% productive, and may be only 85% productive or less under non-optimal work conditions.
- Ergonomics solutions can help to regain some of the lost 15% productivity by improving work conditions and
- Increasing efficiency.
- Median increases in productivity for successful controls from the case studies in the 15% to 20% range, but how
- Productivity measured not known, probably varies widely.
- Conservative estimates were chosen.
- High productivity increase – 10%, medium = 5%, low = 2.5%.
- Value of productivity equal to annual cost of worker salaries multiplied by percentage increase in productivity.
Download Ergonomics Cost-Benefit Calculator
Ergonomics Cost-Benefit Calculator [Excel]
(Source: Original calculator developed by Washington State Department of Labor and Industries)
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