Before the discussion on the financial burden of MSD begins, we should be clear that the most important motivation behind injury prevention and wellness is that it is the right thing to do.
Employees take the brunt of the “human costs” of MSD – unnecessary pain and suffering, loss of income, stress and conflict, etc. People deserve to go to work every day and return home to their families in the same condition, if not even better.
Unfortunately, this argument doesn’t always work when justifying an injury prevention and/or wellness initiative.
The good news, though, is that you can use cost reduction to prove the ROI of injury prevention and wellness programs to your boss, plant manager, or chief number-cruncher. MSD’s are preventable! For businesses to remain competitive, they will have to adopt a prevention mindset at all levels of the organization.
Costs of Musculoskeletal Disorders
Overall, musculoskeletal conditions dominate the United States illness burden, affecting over 40 million people age 45 and older. (Stanford, 2003) With an aging workforce and the skyrocketing costs of health care, this is expected to rise over the coming decades.
Direct costs of MSD are easy to measure, while indirect costs of MSD are much harder to measure and quantify.
Direct Costs of Musculoskeletal Disorders
Direct costs of MSD are covered by workers’ compensation insurance, and include indemnity payments to injured employees and all expenditures for medical care and related items. Medical care expenses include physician visits, diagnostic tests, prescription and over-the-counter medications, hospital stays, aids and devices, and outpatient surgical procedures.
Direct costs are generally easier to quantify and can be found by looking at insurance claims.
Indirect Costs of Musculoskeletal Disorders
Indirect costs of MSD are not covered by workers’ compensation insurance, and include items such as wages paid during lost production time, training and compensating a replacement worker, presenteeism, administration time to file reports, absenteeism, overhead costs and legal fees.
Indirect costs of MSD are difficult to measure. For example, how do we measure presenteeism (employees attending work while feeling unhealthy, often leading to decreased productivity)?
Hurting people are less productive and produce lower quality work. When the mind is on pain, it is not on task which leads to mistakes and also increases accident risk.
Because indirect costs are difficult to measure, the “iceberg analogy” is often used to describe direct and indirect costs of MSD, with the direct costs being the smaller mass you can see above the water and indirect costs being the larger, unseen mass beneath the water.
How to Calculate Indirect Costs of MSD
Fortunately, OSHA provides a guideline for calculating indirect costs based on studies conducted by the Stanford University Department of Civil Engineering. An abbreviated listing of indirect cost drivers includes:
- Any wages paid to injured workers for absences not covered by workers’ compensation;
- The wage costs related to time lost though work stoppage;
- Administrative time spent by supervisors following accidents;
- Employee training and replacement costs;
- Lost productivity related to new employee learning curves and accommodation of injured employees; and
- Replacement costs of damaged material, machinery and property.
Example calculation:
The indirect cost ratio allows us to estimate the total costs of MSD. The following is an example calculation.
Using the standard 3% profit margin that OSHA uses, it would take $3,134,999 in sales to cover the costs incurred by the five injuries in this example. (calculated using OSHA’s “safety pays” calculator)
I hope you can use this information to properly calculate the financial toll MSD’s are having on your company. Over the coming weeks, the Ergonomics Plus blog will be discussing the causative risk factors that contribute to MSD.
Check out the rest of the MSD Prevention 101 series.