By Patrick Hogan, handle.com
Unfortunately, many construction businesses see productivity and safety as being at odds. It’s the bitter truth: cutting costs could be to the detriment of job site safety as an ill-advised approach to raising productivity or seeing safety measures as a needless addition to an already complex and complicated construction project. Of course, there are basic measures built into the process of many construction businesses, even those that are not conscientious about safety. However, many fail to remind themselves that safety and productivity are aligned with the goal of increasing profitability. The costs of safety are not without return. And the price of overlooking safety is heavy.
Construction is one of the most hazardous industries. According to data from the National Safety Council, the number of preventable fatal injuries in 2020 in construction numbered 957. According to OSHA, 1 in 5 deaths among workers in the United States happens in construction. Safety on job sites is imperative.
Safety is profitable, unsafe job sites are costly
When it comes to the costs of not ensuring safety on the job site, immediate direct costs are incurred as a result of unfortunate incidents. Then there are the indirect costs that could impact the overall finances and even viability of a business.
Direct costs include:
- Medical bills
- The cost of litigation
- Regulatory fines
- The rise in insurance premiums that result from workplace accidents
On the other hand, indirect costs include replacing workers, hiring, retraining, restructuring projects, damage to equipment, penalties for delayed work, and loss of revenue due to project delays. Workplace accidents can also lead to project loss and a permanent dent in your reputation, causing ripples in revenue generation.
Medical costs and rising insurance premiums
The National Safety Council reported that in 2019, the average cost of an injury that was medically consulted was $42,000, while each fatality incurred medical and other expenses up to $1.22 million per death. According to data from Liberty Mutual, workers comp claims for non-fatal falls and accidents tally up to $2.5 billion annually. Claims are the top reason for insurance premium increases for construction businesses. Financially, an unsafe workplace leads to higher costs.
Regulatory fines
Each Occupational Safety and Health Administration (OSHA) Section 5 violation can incur a minimum of $5000 up to $70000 per violation. Section 5 violations are related to ensuring a safe workplace where employers “shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.” Adjusted yearly for inflation, the current maximum penalties for Serious, Other-Than-Serious, and Posting Requirements violations are $14,502 per violation; $14,502 per day beyond the abatement date for Failure to Abate violations, and $145,027 per violation for Willful or Repeated violations.
Of course, these fines vary depending on the severity of violations, and other agencies can also levy penalties on businesses. Some fines due to workplace hazards can be business-ending. For context, in 2021, the Department of Labor & Industries imposed a $1,242,807 fine on Washington roofing contractor Allways Roofing Cost due to “willful serious violations” at three job sites.
Some workplace accidents result in litigation, which can incur high costs.
Workforce changes
Retaining workers is one of the biggest challenges in construction. Whether you’re looking for general labor or skilled workers, the turnover rate in the construction industry is acutely high. Whenever safety issues arise in workplaces, the risk for departing workers is consistently increased. Whenever an untoward incident happens in the middle of a construction project, replacing workers with the skill required to push through with the project can be costly both in time and money.
Project delays
Project delays increase the costs involved throughout the project, both directly and indirectly. Additional labor and equipment usage equal more resources tied up to a project that could affect other projects in the pipeline. Another issue project delays cause is poor client experience. Many contractors are notorious for not finishing projects according to the agreed-upon timeline. Companies that are able to pride themselves on sticking to the project calendar gain the privilege of being the contractor of choice for many customers. Unsafe workplaces where delays are inevitably involved can cost the business current and future customers.
Repeat adjustments in project processes
Part of any safety program is ensuring the flexibility to establish new processes as the circumstances change. However, a solid safety strategy means that many issues are appropriately anticipated, allowing businesses to make strategic time and resource investments that streamline safety. When a company takes on a reactive approach, the need to implement changes in the middle of a project can lead to inefficient and unoptimized decisions. These may include choosing suboptimal suppliers for safety gear, hiring safety personnel without the appropriate vetting, and losing out on days that could have been frontloaded during crucial points of the project.
Losing projects
Losing business opportunities is one of the most consequential indirect costs of unsafe work conditions. Many federal projects review bidders’ citations and may even have internal rules around the acceptable number of citations before a bid gets automatically ignored. Losing work due to the number of safety violations is a real risk for contractors, especially in the hazardous nature of work in construction. Even private clients may balk at repeated serious citations even if all other factors point to you as the best contractor for a project.
Strategic safety
Taking a strategic look at safety pays off manifold for contractors. Being conscientious and streamlined in the way you tackle job site safety doesn’t only save lives; it’s also financially wise. Short-term thinking and trimming the fat around safety investment can ultimately cost you profits or your business.
About the Author:
Patrick Hogan is the CEO of Handle.com, where they build software that helps contractors and material suppliers with lien management and payment compliance. The biggest names in construction use Handle on a daily basis to save time and money while improving efficiency.
