The Iceberg Theory & Workplace Injuries

We all know workplace injuries cost our organisation in terms of compensation payments but have you ever considered the indirect costs of an accident and how much harder your sales team will have to work to cover the “real” costs of an injury.

What is the Iceberg Theory?  It is a calculation method developed to estimate the indirect costs of an accident in your workplace.

Lets look at the formula:

Accident cost =(a)

Associated costs: Investigations, loss in productivity, equipment downtime etc = 5 X (a)

Replacement costs: overtime, new employee, retraining etc = 1 X (a)

Now add the totals of each cost segment together and you will get your REAL cost of an accident.

Example: Accident cost $100 + Associated Costs @ $500 + Replacement Costs @ $100

= $700 for an accident that appeared to have only cost $100.

To give you some idea of what impact your injuries have – lets look at the sales required to cover your workplace accidents:

Lets say you have one incident of Carpel Tunnel Syndrome and the Total Cost is $18,271. Lets also say that your profit margin is 5%. The total sales you now need just to cover that one incident is $365,420.

Thus the Iceberg Theory – The initial cost of an accident is only the tip of what it really costs you.

About the Author

Joanne Wallace is our resident "Safety Guru". Joanne has provided advice on safety management for the past 10 years and written hundreds of articles on safety issues and tips. Joanne has experience in many industries ranging from manufacturing, food processing, timber milling, retail, office and wholesaling providing her with knowledge and experience managing risk and injuries in these industries.

Leave a Reply

If you want a picture to show with your comment, go get a Gravatar.