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COST OF ACCIDENT

Kuldeep Bhatt

12th Jan07
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Objectives
Understand why accident costs should be
determined
Know cost categories
Indirect, direct, intangible, uninsured
Understand the impact the cost of accidents

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Introduction
Management needs to know accident costs
Justify accident prevention activities
Set priorities
"Direct costs" are easy to identify
Insurance, medical costs, equipment damage, etc.
"Indirect costs" are often hidden
Lost production, administration, etc.
"Intangible costs" are not usually considered
Lost business, negative public relations, etc.

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Accident Cost Categories
10 categories of costs
Includes direct and indirect costs
Wages for uninjured workers
Damaged material or equipment
Wages for injured worker
Overtime cost
Supervisor wages for accident-related activity
Wages lost due to decreased productivity of injured
worker
Learning cost for new worker
Uninsured medical cost
Clerical and management cost
Miscellaneous
*National Safety Council, Accident Prevention Manual, 11th Ed.

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DIRECT COST
Compensation towards Total
Permanent / Partial Disablement
Compensation under W.C.Act
towards Salary/wages
Medical & Hospital charges
Transportation charges
Any other
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INDIRECT COST+
Category of employees
Injured employee
Other Employees
Supervisor
IPC/Hosp.staff
Safety Staff
Executives
Safety Committees
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COST OF MATERIALS AND
PRODUCTION LOSS DUE TO
Spoilage of materials
Damage of materials
Damage of machine
Damage of tools/equipment
Idle m/c and clean up , repair etc.
Other damage and repairs

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INCIDENTAL COST DUE TO
Overtime for fulfilling order in time
Payment of forfeits
Welfare and benefits expenditures
Preparing , training or hiring substitute or
overtime
Decrease in production by the injured
and others
Amount paid to the injured & his family
other then compensation
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INCIDENTAL COST DUE TO
( Continued)
Production loss due to masswork
stoppage by employees
Overhead and Administrative expenses
Loss of profits and productivity
Amount not classified elsewhere
Expenses of Govt.authority in conection
with Accident/ Incident Investigation

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Other Cost Estimating
Methods
Determine cost of lost work
Use the average labor rate (wages + benefits)
Employee hours lost x labor rate = cost
Get direct costs by studying company
records
Medical, insurance costs, property damage,
fire losses, etc.
Add 20% to the total for indirect costs

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Impact of Accidents on
Profits and Sales
A companys profit margin determines
how much sales must increase to
recover lost accident costs
Accident cost
= sales required to pay for accident/injury
Profit margin

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Accident Cost Calculation Format

Microsoft Office
Excel Worksheet

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