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Cost of Injury versus Investment in Safety

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Safety in Construction
Prof. Uma Maheswari
Department of Civil Engineering
Indian Institute of Technology-Delhi
Lecture-04
Cost of Injury Vs Investment in Safety
Yes, good morning, so this is the second lecture on safety in construction. So, today's lecture will
be primarily on cost of injuries and so, one is that is complete set of costs related to injury. Other
side you have all costs related to safety, we will discuss these 2 in today's class and how a safety
budget is planned, so that will be the end of this today's class.
(Refer Slide Time: 00:48)
So, accident cost, accidents always cost a construction organization a great deal that everyone
knows. Because there is lot of other issues are disturbed in terms of productivity in terms of
helping the injured worker get his medical facilities and so on. And in a way a lot of chaos
happens as a result there is lot of slow progress in construction sites. So, lot of things happen an
accidents always have a great amount of cost to any construction organization.
So, according to Hinze, a researcher in safety, he said if the true cost of injuries are well defined,
the management can very clearly plan for an informed decision on safety. In a way, if I know
that I have to sell out this much portion on cost on safety, then I can think of any safety measure
or something to curtail this cost on injury, so that is what is a background meaning behind. So,
keeping workers safe in any construction sites always come with an expense, several people have
commented on.
If you want to have safe workers, you have may have to give them proper PPE or you may have
to give them a safety net and so on. If they are working at heights, you may have to safeguard
them in so many ways then accordingly you have to pay or you may have to spend on something.
So, safety always comes with some expense and worker safety cost has some amount of an
expense.
Now when you look at the worker safety, compared to the human suffering and the pain, loss of
a worker or something, so should we really think of profit of project or should we think of
spending money on safety for the worker? So, that is the biggest question to any employer, but
many of the contractors have told even though there is some amount of expenses goes in terms of
safety, still there is a positive impact on this spending on safety budget.
Because if there is no accident workers keep on working, they also have a contented feeling that
sites are very safe. So, there is no injury, then there is no money spent on injury cost or
something. So, some contractors at least 70% of the contractors have said safety practices have a
positive impact in the stand on safety.
(Refer Slide Time: 03:12)
So, now let us discuss about the true cost of injuries. So, true cost as you have seen in other cost
issues it has 2 components predominantly, one is direct cost and the other one is indirect cost.
Indirect cost sometimes you can include claims, sometimes you can exclude claims, there are
different groups of working out on the indirect cost. So, what do you mean by direct and what do
you mean by indirect?
So, direct cost is nothing but any visible cost, which is often referred as an insurable cost, some
workers say, so this workers compensation is primarily taken up as a direct cost. And some
researchers have said whatever cost you can quantify with the reasonable amount of accuracy, it
will not be too deviating from the actual expenses. But if you can calculate to some extent an
accurate value, then those costs are all can be calculated as an direct cost.
For example, ambulance services, medical and ancillary treatment, medication, hospitalization,
disability benefits and lost wages of injured workers, these all comes under direct cost. Let us see
that indirect cost, so all the other costs that are not recovered through insurance coverage, they
can all be classified as an indirect cost or those costs which cannot be quantified that easily with
reasonable accuracy.
Or it is very difficult for you to go and take out each and every item and then calculate the cost,
then it is primarily called as an indirect cost, we will see in detail with examples. Most of the
indirect costs can be categorized as being related to the cost of lost productivity, damage
materials, equipment, added administrative efforts and so on. So, now what about the health and
safety program implementations?
That also has some amount of costs towards safety, will that be calculated as one of the cost
parameter? That is still a question mark I have put, because the spending on safety is never
treated as a cost these days, it is treated as an investment on safety that we will come back at the
end of this class. Then there is something called hidden cost of injury, what do you mean by
hidden cost is where there is no historical record kept, which implies the pain and suffering of
the worker.
The loss of a career up to the worker because he lost an arm or a leg and he is no longer able to
continue his earlier work, his career is totally shattered. So, these all can come under hidden cost
of injury and you would not be able to calculate or quantify this hidden cost.
(Refer Slide Time: 06:00)
And there is an other group of people who have classified as financial cost and social cost. So,
financial cost is your direct and indirect cost what we have seen, to some extent all those can
come under financial cost. Social cost is any cost that can result in utilization of national
resources. So, what do you mean by national resources? For example, if you involve any
government sector people for calculating or for any associated costs, then it is primarily comes
under social cost.
For example, productive years of the injured worker, government support towards medical
expenses and hospitalizations, some government also extends support for all these injured
workers in terms of medical expenses, maybe the employer may pay 50%, the 50% of these
expenses will be taken care of by the government, this happens in many countries. So, the
government is also has some component on the cost of injuries.
The government regulatory authority, for example a major accident happened and there is so
much of chaos because of some incident that happened in a particular locality, then the
government may also extend the support in terms of administrative personnel or authority for
inspection, investigation and other scenario, so that cost will be part of your social cost. The next
one is court, maybe it can come in terms of the reason behind the accident or claims behind the
accident, something related to that. So, the people involved in the court and the proceedings, they
all can become part of the social cost.
(Refer Slide Time: 07:49)
Now in the same note, you can also classify the true cost of injuries in terms of fixed cost,
variable cost and disturbance cost. Fixed cost, so which cannot vary with the absence of the
workers, if the workers had a minor injury, they may be absent for a few weeks of time, if they
had a major or a permanent disablement, they maybe absent for a few months of time. So, that
will not affect the cost then it is primarily called fixed costs.
For example, administrative costs, communication cost and so on, they all can come under fixed
cost. The next is variable cost, so this variable cost varies with the absence of workers. So, the
period of absence of the workers will be dependent on the cost then those all will come under the
variable cost. For example, if you want to keep a replacement worker or a substitute worker in
the absence of an injured worker.
Then the salary to that worker will be dependent on how much time he is replacing the injured
worker or overtime extra work to compensate the productivity loss. So, when the injured worker
has recovered and joins the work these extra expenses will start coming down, so those expenses
can be categorized as variable cost. The next one is disturbance cost, so disturbance cost depends
on the nature of the accident maybe there is a lot of major accidents happened because of one
incident.
Then that can create loss of reputation maybe failed project progress in the same project or lot of
fines you may have to go through or maybe trials in the court, you may have to spent so much on
that, mental disturbances as you may lose reputation and no projects in future, so it can all
shatter. So, these are all primarily can come under the disturbance cost.
(Refer Slide Time: 09:46)
Then let us look at from the claims lawsuits. So, there are so many lawsuits which primarily
favor the workers, because workers are the one who gets injured and they are the one who does
not want to get injured. But unfortunately or fortunately even though the standards or procedures
are made by the top management still the low level management on workers they are the one
who gets injured
So, construction accidents, it can result in totally a life shattering death or it can be from life
altering ways of your routine life in terms of spinal cord injury, paralysis, brain damage or loss
of limb, disfigurement, burns and which are even worse than the death. So, if you look at the
lawsuits in one report, it was reported a 26 year man who fell from a ladder and suffered a head
brain injury and because the employer had failed to provide him a scaffold and the other PPE
supports.
So, he was compensated almost like 7360000 dollars, which is like a highest compensation
recorded in the state of New York, this is the behind. So, your cost of injuries as a result of
accident may collapse you in terms of you cannot even think of project profit margins.
(Refer Slide Time: 11:05)
Now let us look at the cost related injuries in terms of different sectors in terms of different
major accidents, minor accidents and so on. So, work related injuries mean losses not only to
workers, but also to their families, employees and society that we have seen earlier. And
calculating an accurate estimate is always very difficult, because of several reasons. A few
reasons are hidden costs, which we have seen few slides earlier which is very difficult to
quantify and estimate.
The other one is musculoskeletal disorders, as I told which is these health issues cannot happen
immediately on spot, some health issues may happen after prolonged exposures, 2 years, 3 years
or 5 years and so on. So, to which particular contractor under whom they were working, under
what circumstances it is very difficult to estimate and then take the claims off. So, that is where it
is very difficult to have a reasonable estimate on injuries.
If you look at these fatal and non fatal, if you see fatal claims on injuries even less compared to
the non fatal because compared to one fatality, you may have at least like 100 or something like
that on major injuries. Because last class we have seen on the number of ratio between your
fatality to major accidents to minor accidents to near misses. So, it varies in 100s times or it can
multiply in 10s time. So, with maybe one fatality has happened, you may have at least 20 or 30
major injuries, so as a result the claims are really high.
(Refer Slide Time: 12:49
Now based on the different levels of skilled and unskilled workers, if you see the unskilled
workers are the one who has a larger amount of fatality and the non fatal injuries compared to
other sectors. Because the skilled workers they know how to behave safely in the construction
site. Unskilled workers as we have seen, why construction industry is risky? Most of the points
that we have discussed on subcontracting, migrant, seasonal workers and so on.
All these attributes go very well jelling with the unskilled part of your most of the labors, that is
where the fatality and the non fatal injuries compensation is very, very high. So, now if you look
at the medical facilities, and how much was spent? So, this was also a data taken from all types
of employment in the construction chart book. So, if you see here, so this shows, inpatient
expenses, office visits, then outpatient expenses, emergency rooms and one the medicine and
prescribe medicines and they leave the hospital if you see. So, the inpatient claims are too high
and people have spent so much on inpatient claims.
(Refer Slide Time: 14:07)
Now how is the different injuries are classified and how are they compensated? Some hint is
given, various references are there to show the hints. And one reference I have picked as a IS
code IS 3786, which talks about method for computation of frequency and severity indexes in
construction projects. So, now this is based on a physical injury or I would say major injury,
suppose if and you are losing an organ in your body.
Suppose if it is an ill health or something like that, like a minor injury, then there is also an
equivalent calculating proportions. And approximately it all comes nearly to the same as given in
the IS code. So, the nature of injury is here given as contusion, wounds, fracture, sprain and these
values are given in terms of man hours. For example head contusion 134.4 man hours or 42.7
man hours if it is a wound, upper extremities, upper part of the body and lower part of the body,
so accordingly you have values here.
So, major injury, this is how the mandates loss or given as a guideline. For minor injury you get
a different set of a guidelines, but every injury is actually compensated.
(Refer Slide Time: 15:35)
So, now let us look at different other sources South African Department of Labour. They have
actually had an statement on the different classifications and the compensation paid. First aid
treatment is South African Rand 1000, and the medical consultation or treatment 3500 South
African rand and lost time accidents or major injuries 30,000, cost per fatality is 1.5 lakhs. So,
this is what is the compensation paid.
So, overall if you see fatality is paid little high, is actually paid little high, then comes a major,
then comes minor on the first aid treatment. But the final total cost on claims on fatality or lost
time or minor injuries and first aid, total it comes approximately to the same value. Because the
number of first table will be too many in compared to the medical consultation, that will be too
high in compared to last name.
So, based on the frequency numbers obviously you will have all the components equal to the
same total values. If you see the percentage of material handling sorry slips, trips and falls being
struck by or colliding with an object, accidents involving tools, fall from heights. So, material
handling ranks number one of total claims because there are so many claims and you pay so
much on the material handling.
Slips, trips and falls, fall second, next in the number of claims, so like that you have the other
one. Fall from heights it ranks high in the frequency, but if you see in the percentage of total
claims it is not that high and compared to the material handling, maybe because of the
musculoskeletal disorders which comes along with the material handling. So, material handling
is little ranking high in the percentage of total claims. Then sprains and strains, again it is the
musculoskeletal portion which I am talking about, that is actually taking up more claims. Then
cuts or punctures 19%, fracture 11%, contusions 9%, eye injuries is ranking as 5%.
(Refer Slide Time: 17:52)
Then here let us see the different cost, so far we have seen in terms of fatality, major, minor and
so on. So, this is an index on what is the accident prevention cost and what is the accident rates.
So, the first pie chart is on accident rates by project phrases and the second pie chart is primarily
on accident prevention cost. So, structures, so more lot of money has spent on the prevention
cost for any structure collapse or something. And if you see the accident rates, structures is ranking high. So, there is a logical reason also for
the connection, so because structures accidents are too high. So, there is also a large amount of
money spent on serious investigation on safety precautions in controlling the number of
accidents related to structures. The next is earthmoving here also you will see lot of safety
policies and procedures are all taken up.
And earthmoving is actually having so much of cost compared to the other cost (()) (18:57)
again, so accordingly you have the distribution. So, every company can have a pattern on
accident rates and they can shell out on the prevention cost. And so, these are the other costs, so
accident prevention, it can come under safety or some people also bring it under cost, so we have
discussed that also.
Now the next major portion on cost related to injury in a construction site comes under penalty,.
So, in 2019 the maximum penalty amount per willful or a repeat violation was remarked as
132,598 dollars per violation on the construction sites. And if you see in construction sites many
of these fines or penalty are paid because of multiple citations or an which comes under willful
or repeat violations. So, this is also an other cost which the company spends in terms of an
accident prevention.
(Refer Slide Time: 20:01)
So, if you look at the categories of different the claims. So, fatality, full incapacity in the sense
completely who are disabled, you will not be able to work even though you are alive, you will
not be able to have a job opportunity after the accident. Partial incapacity maybe you will have
restrictions in your job earning capacity, you may not be able to do the work which you are
doing it earlier.
Long absence, maybe you are away from the work for 5 months or 3 to 4 months or 5 months
and then you can come back to work, but you will not have an incapacity. And the next is
classified as short absence, maybe for a few weeks you maybe away from your job site, and then
you will come back to the work and you will continue with your same work. So, these are the
different classifications when it comes to calculating your injuries or claims and so on.
If you see the pattern of accident over the project progress, so when the project is peaking up to
50% to 70% you will see there is lot of accidents happening in a construction site and after then
the accidents are reducing. So, initially when the project is picking up it is gear, again you do not
see so many accidents. So, obviously there is a wave pattern of accidents which is seen in many
of the construction projects.
So, this can be related to a schedule pressure on most of the project, because the completion
pressure starts coming in after maybe close to 40, 50% that progress has to happen. And we have
to finish the remaining part of your construction project. And this pressure starts triggering out
speedily work and obviously the workers are the one who are getting injured.
(Refer Slide Time: 21:50)
Now after an employee is injured, so what are the precautions and how he should be taken care
of? So, the first thing is without any investigation or anything on who did and what and so on,
the injured worker should be given a proper treatment from a appropriate medical provider. So, it
can be a nearest hospital maybe a first aid treatment, it can be an in-house hospital facility,
wherever you it is a complete best treatment, the injured worker should get the first treatment.
Then next is report the incident or the accident to the site supervisors, the site supervisors who
are available there should be aware of what has happened? Who got injured? What happened?
And he should be immediately informed. And before any investigation or something has
happened, do not discard, do not alter the position, do not change the equipment because of
which the accident happened or material, property whatever which is related to the accident, do
not try to even discard or alter or change the position or do something.
And which led to the employee’s injury unless it is investigated and the case is closed. And
provide time for other employees who witness the injury to speak as to what happened, who was
at fault and so on. So, do not try to consolidate the injury to the crew who were there and so on.
And keep the lines of communication open with the injured employee. First of all, the injured
employee should be able to speak frankly on what happened on the day of injury, and what was
the real incident and how it can be improved and so on.
So, that has to be there and also the workers recovery also should be monitored at each and every
point of time. Show concern on the injured employee and his or her well being, so that is an
other issue, so a little positive note on recover and come back to work will make an employee
become better rather than saying what did you do on that day and why this happened and so on.
Rather than interrogating and investigating, it is better to have a concern on humanitarian means
of concern to the injured employee. Modify the injured employee’s current position to
accommodate all restrictions. So, based on the nature of injury and the medical advice given by
the doctors, so accordingly the injured worker has to be given a different job position rather than
taking away from the job site.
And never accuse anyone of the incident then that is a real first point of what as a after an
incident has happened. So, obviously when you start investigating on the accident or the
incident, it will obviously be pointing out to some men. It can be a group of employers
employees or it can be an equipment which was at fault, whatever. But equipment will not create
an accident on it is own, when the equipment is at fault the employee who is working close by
should have reported it or he should not be operating a defective equipment.
So, whatever it is, it obviously corners down to one particular or a group of workers. So, instead
of that, we should always be in a positive note on seeing to that the same accident does not
happen again. Keep in constant contact with the insurance carrier to help the worker recovery
with peace of mind on the cost of injury, hospital fees and so on. So, now we have talked about
the worker who is injured has to come back to work, and he has to be given the job. Now we
have to discuss about what are the different types of job facilities and what happens once the
worker is back to the job.
(Refer Slide Time: 25:53)
So, the goal of any employer is to bring back the employee to work as early as possible, because
keeping the worker away from the job site. Actually you may have to it is like too much of a
cost, you have to bring a new replacement worker, he has to be trained, the next day itself he
cannot start his productive work, he has to be given a proper training and space for him to get
adjusted with the crew and so on.
So, this takes some point of time and when he picks up the productivity, most of the time the
injured worker itself may be ready to come back to work. Goal of a employer is not to just send
away the worker who got injured, because there is a fault on the injured worker, because he
created a loss of reputation to the company. So, that should not be the real goal of an employer
then that will not work out.
So, return to work is not punitive. So, because the worker has done something and he has got
injured. So, it should not be treated in a punishment mode on so putting the worker back on the
same job and making him do whatever the work he has done earlier. So, an alternate duty should
be given in to respect the work he has done in the last 5, 10 years or something or the sincerity he
has shown into the job in the last few years or his education level.
So, everything has to be taken into account in maintaining the dignity of the worker. And
positions designed should not be in terms of punishment in mind, what will happen is it will only
increase the friction between the employer employee, and it will also increase the claim
management problems. So, until then, at least the employer should be in a positive mode towards
the workers.
In the end, so if the punishment mode happens, then the negative energy starts creating and you
will not be able to get a productive job, your best job and a peaceful job in future. So, the
employer should always think in mind the job should be productive, useful and meaningful at
any point of time in the end of the day. So, types of alternate duty, so number 1, transfer to other
job suppose based on the permanent disablement or temporary disablement, you can shift the
worker to another job.
But the temporary placement of the injured employee in an existing position and also complying
with the medical advisors limitations. And accordingly you can keep them temporarily and get
all the work transferred to an other replacement worker and then this worker can be shifted, so
that sort of an arrangement is also possible. The same job as earlier you can also keep the worker
in the same job, but you can also remove some segments of the job which the worker cannot do.
Or we can also put some restrictions on to the worker that he need not do some segments of the
job, so that he still able to finish his job properly. So, placement of the injured employee in the
earlier position, but with some elements of the job removed or with restrictions. Then gradual
acclimation, so once the worker is injured and he is in the stage of recovery, you cannot give him
an 100% productive job to happen.
So, you may take him for 30% productivity, and after 2 weeks, you may expect him for 50%
productivity, so slow gradual acclimation of the worker absorbed into the site that you may have
to think of. So, this is an other pattern of putting the employee back to work and you should also
keep in mind the employee is not exerted on the full day workload until he is recovered.
(Refer Slide Time: 29:40)
So, far we have talked about cost of injury, different patterns wherein how the compensations
are, how the claims are done and so on. And we have also saw the workers medical facilities and
how they are back to the job, what sort of jobs the workers should be posted and so on. So, most
of the insures, claims and so on always target about compensation. So, what do you mean by
compensation?
And this workers compensation when we discussed about direct cost, there are some researchers
who said this workers compensation directly contribute to the direct cost. So, now what do you
mean by this workers compensation and why it is required? Even today in many of the
construction sites, the wages for any construction worker in the construction industry is always
kept as low as possible, because there is a pressure from other fraternity.
So, to keep the wage as low as possible, that happens even now. And this is also possible and this
is achieved in many construction sites by hiring immigrant workers at low wages for most of the
unskilled workers. So, primarily they can be seasonal workers, they can be immigrants, so who
will be very ready to do for whatever low wage the employer is willing to give and hence the
workers compensation came in.
So, this workers compensation is to protect the employees who are hurt when they are on the job
site. Now what do you mean by workers compensation? So, it is an amount which is given to
compensate any individual who have suffered occupational injury or an illness. So, it can be an
injury on accident or it can be even a health issue also. But there are a lot of flaws in the system,
because some compensation measures are very difficult to calculate.
For example, this applies to occupational diseases like hearing loss, hearing loss will not happen
immediately. So, it takes a lot of time when you are on site and when you are hearing lot of noise
in the construction site, which is above the permissible limit, which your excavator or your
drilling machines or drilling hammers can pile hammers can easily give cross beyond that normal
permissible limit or injuries, the famous example is a musculoskeletal injuries.
So, which cannot be actually assigned or specific date of injury you cannot assign to, and hence
compensation claims are very difficult to be given to these workers. Because for to pay a
compensation the specific date and time of injury should be given and when that cannot be given
for certain aspects of your compensation of the injuries. With the workers changing contractors
regularly especially for all these issues I said on hearing loss or musculoskeletal disorders and so
on, who will be responsible for these chronic injuries and illnesses?
For the slow injuries to be visible, who will be responsible? And normally what happens, the
trend is it will be the current employer. Because the injury who has shown visible impact our
effect only with the current employer, and most often the current employer will be responsible
for all these compensation and for all the injury related compensation. So, in theory all
employers are equally affected as a result of shifting jobs of these workers and subcontracting
way of culture in the construction industry.
So, now what the employers should take a precaution is, do not hire workers who are more
susceptible to injuries, who are like absent minded every time, who runs here and there and do
their work without taking care of safety precautions, and keep in mind not to take recruit
migrants or even an old workers. So, these are all the different, different precautions one can
keep in mind in order to avoid all these compensations and claims.
So, now this migrants should be avoided for in order to have a zero accident site, but which is
actually the ironical statement that in many of the construction sites, you see migrant workers ly available for low wages and as an unskilled worker.