Take a Bite Out of Your Accident Costs
Ever wondered just how many Original Grand Slam® meals the restaurant would have to sell in order to recover the profits lost from just one work-related injury? We’ll answer this question by illustrating the true cost of a work-related injury and show why focusing on safety is just good business.
Direct and Indirect Loss Costs
There are two types of costs associated with every workplace injury that must be considered when trying to determine the total cost:
- Direct Costs are directly related to an injury and include medical bills, the employee’s lost wages, the restaurant’s workers’ compensation insurance premiums, etc. These costs are typically budgeted and losses are insurable.
- Indirect Costs are typically not directly associated with a loss. Examples include: decreased productivity, replacing the injured worker, training replacements, administrative costs, legal fees, spoiled products, reputation risk and lower morale. These costs are typically hidden, not budgeted, and not insurable.
According to the Occupational Safety and Health Administration’s (OSHA) “$afety Pays” Program, the indirect costs associated with injuries and illnesses are 1.1 to 4.5 times higher than the direct costs, depending on the type of injury and/or the amount of the direct costs1. Consider the following case study:
An employee walking in the back of the restaurant trips over a water hose. The employee sustains a serious knee injury resulting in 300 missed days of work. The direct cost of the incident was $85,000. Using the OSHA $afety Pays tool, the estimated indirect cost would be an additional $93,500. Considering both the direct and indirect cost, the total estimated cost of this injury would be $178,500.1
During the same year, another employee carrying a bag of fries walks out of a freezer and slips on ice, resulting in a severe lower back strain. Unable to perform their regular duties, the employee was on restricted duty for several months. The direct cost of this incident was $26,000 with an estimated additional indirect cost of $28,600. The estimated total cost of this injury would be $54,600.
The Impact of Losses on Profitability
As mentioned in the case above, in one year the restaurant was faced with two claims totaling $111,000 in direct claim costs plus an estimated $122,100 in indirect cost, resulting in a total cost of $233,100. As a restaurant owner or manager, it is important to understand how these losses impact the company’s bottom line. Factoring in an average profit margin of 5%, it is projected the restaurant would need to generate at least $4,662,000 in additional revenue to cover the costs from these two injuries. This means the restaurant would need to sell approximately 560,0002 Original Grand Slam® meals to recover lost profits.2
The above scenario reveals some very large numbers, making it all the more difficult for many companies to believe. While the theory could be debated, most will agree that, when accidents happen, there are associated indirect costs that go beyond the direct medical bills and lost wages. Furthermore, it is clear that workplace accidents have a clear negative impact on profitability and, ultimately, the company’s bottom line.
The good news is that there are many controls for restaurants to mitigate their total accident costs. Here are best practices every restaurant manager should consider:
- Work to prevent workplace accidents. Focus on the types of incidents driving both the number of accidents and the cost of claims. For most restaurants this may mean placing an emphasis on:
- Slips, Trips and Falls –typically account for 24% of all restaurant work-related injuries and 42% of the costs
- Cuts, Punctures and Scrapes –typically account for 22% of all restaurant work-related injuries and 7% of the costs
- Burns –typically account for 14% of all restaurant work-related injuries. The leading cause of most burns is the fryer
- Sprains and Strains –typically account for 12% of all restaurant work-related injuries3
- Return injured employees back to work as quickly as possible. Supporting an employee’s transition back to work has been proven to be beneficial in many ways, including the retention of experienced workers, reduced costs associated with turnovers, increased productivity, and a reduction in direct accident costs. Restaurants are encouraged to reach out to their insurance carriers or agents if they need assistance in determining viable transitional work opportunities.
- Complete an assessment of your overall workplace Safety and Health Program to identify opportunities for improvement. Evaluating your safety and health efforts from a high level is a valuable process. McGriff offers an online safety and health program assessment at no additional cost to our clients. It’s an easy and efficient way to explore the four fundamental components of an effective safety and health program. Scoring and recommendations are provided at the conclusion of every assessment to assist in building a strategy. To learn more, please contact Nick Reynolds, McGriff Risk Control Consultant, at Nick.Reynolds@McGriffInsurance.com
When restaurants choose to invest their time and money toward preventing incidents and managing costs, it has a positive impact on their total cost of risk. Employees will be better able to perform their jobs safely, which increases productivity and ultimately yields a better return on investment. By understanding the true cost of accidents and investing in basic safety programs, restaurants can take a bite out of their total accident costs. Let’s talk about how McGriff can use our expertise to service your franchise concept.
Charlie Page, Senior Vice President
Direct: 404.550.7738 | Charlie.Page@McGriffInsurance.com
Nicholas Reynolds, ASP, AVP, Risk Control Consultant
Office: 678-734-9136 | Nick.Reynolds@McGriffInsurance.com