You’ve heard the saying, “You have to spend money to make money.” The key to making that accurate is investing the money wisely. Safety is no exception. Done wrong, safety can be a pure cost center. But by adopting deliberate and innovative approaches, particularly through EHS outsourcing, you can turn your investments in safety into long-term cost savings—and potentially even turn the safety function into a profit center.
Direct expenses associated with safety, like personnel salaries and PPE purchases, will always be costs, but if your overall expenses are proactive and deliberate, they will yield a net positive return in the end. Outsourced health and safety programs allow experts to apply efficiencies and knowledge that maximize your safety ROI. Here’s how:
Probably the most apparent impact on the bottom line will be avoiding costs connected to accidents, such as medical expenses, paid time off for injured employees, and costs to replace or fill that role in the worker’s absence.
Though these expenses will vary greatly depending on the circumstances, OSHA has a tool to help businesses understand the financial impacts of safety accidents. You can check out the Safety Pays tool here.
Safety incidents can also impact production schedules. Many incidents cause partial or full shutdowns, and downtime can be a business’s worst enemy. Fewer (or better yet zero) accidents not only saves on direct costs, but avoids unscheduled delays.
A significant way to reduce safety overhead is to improve your company’s Experience Modification Rate (EMR). This critical metric is used by insurers, including workers’ compensation, to estimate the likelihood of a business filing a workers’ compensation claim. A lower EMR can shave major dollars off your insurance premiums – directly impacting the bottom line. Accidents and incidents have a negative effect on the EMR, so protecting your EMR becomes directly linked to protecting your employees.
Regulatory actions, commonly in the form of fines, can be crippling to businesses. Compliance is obviously a major component of safety management, but can sometimes be hard to maintain when a safety program isn’t comprehensive and proactive. Falling out of compliance can add up quickly. OSHA penalties are up to $16,550 per violation, with willful or repeated violations now costing $165,514 each.
Whether brought on by a regulatory agency or by an affected employee, litigation over accidents can wield a hefty price tag. Even when the company may not be at fault or has a solid defense case, legal proceedings cost money and time – and can also cast a negative cloud on the brand and reputation.
A proactive and well-executed safety program does more than avoid negative costs. The right safety management promotes better overall performance. When workers feel safe and appreciated, morale goes up. With better morale comes better efficiency and quality of work, as well as reduced churn within your staff.
A 2016 study in the Journal of Occupational and Environmental Medicine found that companies in the S&P 500 that were recognized as health and safety leaders saw stock values appreciate by 325% between 2000-2014. Meanwhile, the market average appreciation was just 105%.
The report concluded, “This study supports prior and ongoing research demonstrating a higher market valuation — an affirmation of business success by Wall Street investors — of socially responsible companies that invest in the health and well-being of their workers when compared with other publicly traded firms.”
To get transformative cost savings or even move safety investment into a profit center, OHS must become a pillar of both culture and operations. You need more than a plan – you need a program – a health and safety management system that covers training, inspections, and action items to reduce the number of incidents.
Additionally, you’ll need to establish a framework that connects all your actions to objectives. Doing so will allow staff to understand why certain actions are being taken (e.g. why the training, why the inspections) and why they matter.
Achieving this culture and framework in-house can be difficult for multiple factors, such as resource constraints, lack of leadership commitment, complacency, and resistance to change. However, quality EHS outsourcing companies are specially equipped to overcome these challenges with their insights and efficiencies.
Effective and efficient safety is about more than just being compliant or reducing the number of incidents. Ultimately, when safety becomes a core component of all tasks, it’s no longer a separate function but is a natural element of the working environment. And when this happens, cost savings follow.
By outsourcing safety management to a dedicated provider like SITEX, your business will start to see compliance and financial improvements.
Fill out the form or call us at 888-655-1603 to talk more about the advantages of an EHS outsourcing company.
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