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Cost of Occupational Accidents: An Activity Based Analysis

Cost of Occupational Accidents: An Activity Based Analysis. Pall Rikhardsson MSc PhD The Aarhus School of Business Department of Accounting par@asb.dk. Presented at the Safe Community Conference 2001 Viborg County Denmark. The SACA project.

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Cost of Occupational Accidents: An Activity Based Analysis

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  1. Cost of Occupational Accidents: An Activity Based Analysis Pall Rikhardsson MSc PhD The Aarhus School of Business Department of Accounting par@asb.dk Presented at the Safe Community Conference 2001 Viborg County Denmark

  2. The SACA project • The Aarhus School of Business and PricewaterhouseCoopers • 9 case companies • 27 occupational accidents • 31 interviews

  3. The SACA project • Aims • Test a method for assessing company occupational accident costs • Indicate size of these costs • Assess the effects of stakeholder interest in occupational accidents on company costs

  4. The SACA metod Accident Activity- analysis Cost analysis Results

  5. Compensation Fines Costs when victim returns to work External manpower Colleagues overtime Preventive education/training Extra safety meeting Presents and flowers to victim Investment in new machines/technology Cost of employing a new employee Information meeting and communication Company time - meeting with H&S authorities Colleagues visit victim Production loss due to replacement personnel Extension of safety meetings Change in technology/new instructions Training of replacement personnel Information to staff functions Company time - meeting with police Colleagues discuss the accident Administration -legal department Supplementary salary to victim Extra costs of salary administration Administration, department manager Time used by helping colleagues CEO/manager time Information to upper/top management Administration - safety manager Internal investigation and safety forms Lost hours on day of accident - victim 100 % salary to victim, first 14 days 5 0 30 25 20 15 10 Activities • 6 activity groups • Absence • Information • Administration • Preventive • Production loss • Other

  6. Costs • Time • Materials • External services • Other

  7. Distribution of accident costs 1% 14% Absence Information 3% Administration Preventive actions Loss of production Other 13% 4% 65%

  8. Total accident cost pr. company Accidents in the year 2000 Range of total accident costs (DKK) Average total accident cost (DKK) Company Contruction 1 149 3.006.52 - 8.976.505 5.681.171 Contruction 2 6 25.038 - 161.706 71.530 Contruction 3 12 29.820 - 1.542.708 585.236 Service 1 43 414.950 - 5.919.251 3.846.794 Service 2 5 34.695 - 107.910 75.300 Service 3 3 26.964 - 277.344 110.424 Production 1 40 222.280 - 3.746.920 1.507.853 Production 2 7 85.442 - 1.373.841 520.828 Production 3 5 14.660 - 287.250 123.998

  9. Total accident cost pr. employee 14.000 Lowest/employee 12.000 10.000 Average/employee 8.000 DKK Accident cost pr. employee Highest/employee 6.000 4.000 2.000 - C1 C2 C3 S1 S2 S3 P1 P2 P3 Company

  10. Conclusions (1) • The SACA method can be used for accident cost analysis in most companies. • Cost behavior varies due to e.g.: • Accident type and duration of absence • Wage structures and policies • OHS management system scope • Production process vulnerability

  11. Conclusions (2) • Costs of occupational accidents differ regarding management visibility • The average ratio of visible/invisible costs is 1:1,5 • These costs are usually not insured

  12. Conclusions (3) • Few companies use the accounting information system for accident cost management in spite of being technically possible • The reason given is limited managerial and practical feasibility • A feasible way might be to periodically calculate costs of selected accidents and then estimate total costs

  13. Conclusions (4) • Reported level of general stakeholder‘s interest in company occupational accidents is negligible • Only customers and labour unions have expressed explicit interest in accidents • Effects on costs are non-existing • Accident prevention is seen as potentially more important in the future

  14. Pall M. Rikhardsson MSc PhD Associate professor The Aarhus School of Business Department of Accounting Fuglesangs Allé 4 8210 Aarhus V Denmark Tel.: + 45 89 48 66 88 Dir.: + 45 89 48 63 76 Fax: + 45 86 15 12 90 Mobile: +45 28 59 98 32 e-mail: par@asb.dk http://www.hha.dk/EOK/REGN/STAFF/PAR_FORM.HTM

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