Calculating the Cost of Workplace Injuries to Society

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According to The Herald in Scotland, the House of Commons Scottish Affairs Committee, which is looking into why the workplace incident rate is higher in Scotland than in England, commissioned a report by the National Audit Office (NAO) into the work of the Health and Safety Executive (HSE) north of the Border.

The report addresses this disparity. But it also contains some interesting information on how the HSE calculates the cost of workplace injuries and illnesses to society as a whole. Here’s a look at the HSE’s method.

The HSE Method

The HSE developed an estimated “unit cost to society” for workplace incidents and illnesses. Although these cost estimates can only be an averaged approximation, there are estimated costs for fatalities and each type of workplace injury. The overall unit cost is divided into the following component costs:

  • Human cost—the cost of pain, grief and suffering to the victim, his relatives and friends;
  • Resource cost—the cost of medical treatment, business administration costs, insurance administration costs, recruitment costs and costs to government; and
  • Lost output—which is assumed to be equal to the labour cost that’s normally incurred in employing the absent worker, together with any sick pay.

Using this method, the HSE estimated the total cost of the following:

  • Workplace death: £1.5 million;
  • Major injury: £40,400;
  • An “over-three-day injury”: £5,800;
  • Minor injury: £350; and
  • The average illness: £10,200.

When these costs were applied to the 23 fatalities, 2,625 reported major injuries and 8,039 over-three-day injuries reported in Scotland in 2009-10, the total cost was approximately £187 million (representing about 10% of Great Britain’s total cost for all workplace deaths, injuries and illnesses during that same time period of £1.6 billion).

Note that the HSE has reviewed the methodologies behind this approach, which revealed limitations in both the methods and sources of data used to derive each of the estimates. So it has commissioned a project to produce new estimates of these aggregate and unit costs in 2011.

What do you think of the HSE’s method of calculating the cost to society of workplace incidents? Is it too simple? Does it leave out key costs? Is such a calculation even necessary?