Good OSH is good for business

Benefits of OSH. Worker checking a document with statistics

©EU-OSHA/Rudyanto Wijaya

In tough economic times, it’s important to remember that poor workplace safety and health costs money. What’s more, case studies show that good OSH management in a business is linked to improved performance and profitability.

Everyone from individual workers to national health systems loses out when OSH is neglected. But this means that everyone can benefit from better policies and practices.

Countries with poor workplace safety and health systems use valuable resources dealing with avoidable injuries and illnesses. A strong national strategy leads to numerous benefits, such as:

  • Improved productivity through less sickness absence
  • Cutting healthcare costs
  • Keeping older workers in employment
  • Stimulating more efficient working methods and technologies
  • Reducing the number of people who have to cut their hours to care for a family member

Costs of work-related injuries, illnesses and deaths

What are the economic impacts of both good and poor OSH management? It is vital that policy-makers, researchers and intermediaries understand the answer to this question, but to do so requires good-quality data. EU-OSHA thus aims to address this need in its two-stage overview project ‘Costs and benefits of occupational safety and health’, which aims to develop an economic costing model to establish reliable estimates of the costs.

Phase 1: large-scale study to identify and assess the available data in each Member State that can be used to develop a model for calculating costs.

Output: an overview report Estimating the cost of work-related accidents and ill-health: An analysis of European data sources (2017).

Phase 2a: produce a cost estimation model based on available international data in collaboration with the International Labour Organization, the International Commission on Occupational Health, and institutions from Finland and Singapore.

Output: a data visualisation tool displaying the findings from the cost estimation model (2017).

Work-related injuries, diseases and deaths result in high economic costs to individuals, employers, governments and society. The negative effects of poor OSH management include costly early retirement, the loss of skilled staff, absenteeism and presenteeism (when employees come into work despite illness, increasing the likelihood of mistakes), and high medical costs and insurance premiums. It is estimated that 3.9 % of global GDP and 3.3 % of the EU’s GDP represent the societal cost of work-related injuries and diseases (see data visualisation). The percentage varies widely between countries, in particular between Western and non-Western countries, depending on the industrial mix, the legislative context and prevention incentives.

Phase 2b: develop a more sophisticated economic costing model based on national data sources.

Output:

Injuries, diseases and deaths are associated with various types of costs. First, there are direct costs, such as healthcare costs. There are also costs resulting from losses in productivity and reduced output. Then there are costs associated with the impact on human well-being — that is, the impact on people’s lives and health — that can be quantified and included in an estimate of the burden. In each case of work-related injury or disease, these elements are involved and the addition of the costs of all cases would produce an estimate of the total occupational burden of injury and disease. This way of arriving at a cost estimate — that is, adding the various costs mentioned above to produce an estimation of total costs — is often known as a ‘bottom-up approach’.

A ‘top-down’ approach can also be taken: total costs are estimated by calculating the total burden of injury and disease, and estimating the part of this total caused by occupational factors. Subsequently, the costs associated with the burden of occupational injury and disease can be estimated. These costs are often expressed in terms of existing measures of health, such as disability-adjusted life years (DALYs).

In the current project, both approaches are being taken, as follows:

  • a bottom-up model taking into account direct costs, indirect costs and intangible costs (effects on quality of life and health);
  •  a top-down model based on the monetary value of work-related DALY.

When collecting data for both models, 2015 was used as the reference year to enable comparisons to be made among countries and between the approaches.

 OSH costs model slideshare presentation

The benefits for business

Not only does poor safety and health cost companies money, but good OSH pays dividends. businesses with higher safety and health standards are more successful and more sustainable.

Studies estimate that for every euro invested in OSH, there is a return of 2.2 euros and that the cost–benefit ratio of improving safety and health is favourable.

The economic advantages of good OSH for businesses large and small are significant. To give just a few examples, good workplace safety and health:

  • Improves workers’ productivity
  • Cuts down on absenteeism
  • Reduces compensation payments
  • Meets the requirements of public and private sector contractors

Taking action could bring significant benefits to your business. Find out more about implementing improvements and managing risks here.

Economic incentives

Across Europe, schemes have been put in place to reward organisations financially for having safe and healthy workplaces. These include:

  • Lower insurance premiums
  • Tax breaks
  • State subsidies and grants

One example is the German butchery sector. Participating companies had their premiums reduced if they promoted safety, for example by buying safety knives or giving safety training to drivers.

The scheme resulted in:

  • 1 000 fewer reportable accidents per year for the sector in Germany
  • A reduction in costs valued at 40 million euros in six years
  • A saving of 4.81 euros for every euro invested

For insurers, offering such schemes can help to reduce the number, severity and cost of claims.

Find out more about economic incentives and how they can be introduced: