Saying that ?safety saves money? is a clich?. The real challenge for safety directors is to back up the assertion with substantive economic arguments. There's a 2001 report from Liberty Mutual Insurance that can help you do that.

Study Results

Liberty Mutual interviewed 200 executives responsible for workers' compensation at their companies ? 75 from mid-size companies with 100 to 999 workers, and 125 from big companies with over 1,000 workers. A whopping 95 percent of them said that workplace safety has a positive effect on financial performance.

The really juicy stuff: Of this 95 percent, 61 percent reported an ROI of at least three dollars for every dollar invested in safety. Understanding how the executives calculated the ROI should help you understand how the management of your company thinks and win financial support for your safety program.

Proving that 'Safety Saves Money'

When workplace injuries and illnesses occur, a company incurs two kinds of costs:

Direct Costs: This includes payments to injured workers, reimbursement of medical bills and other expenditures.

Indirect Costs: This includes loss of productivity, cost of training replacement workers, damage to the company's reputation, increased future premiums and other losses not covered by insurance.

Direct costs are the obvious thing that companies look at when analyzing ROI on safety. Indirect costs are the hidden costs that tend to get overlooked. But as the Liberty Mutual report suggests, focusing on direct costs understates the real savings of injury prevention. Ninety-three percent of the executives surveyed said there's a direct relationship between direct and indirect costs. Forty percent reported that $1 of direct costs generates between $3 and $5 of indirect costs. And, according to 13 percent, the relationship between indirect and direct costs is as high as 10 to 1.

Here are highlights of the survey:

SOURCE: Liberty Mutual Insurance Co.: Executive Survey of Workplace Safety

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