Allied HR Consulting

Are you pained by the cost of your workers’ compensation insurance or your medical plan premiums for your workers?  Ask yourself if you have done all you can in your role as owner to improve the safety performance of your company and hopefully influence the direct and indirect costs associated with safety issues. .

 The Cost of Poor Safety in Construction Industry

According to the Bureau of Labor Statistics, accident data shows that the construction industry performs worse than the average of all industries (at least 50% higher).   It is well documented that construction accidents as well as workers’ compensation insurance costs are included in the total cost of new, construction projects.  There are of course the indirect costs borne by injuries and accidents including employee morale and damage to the company image and reduced competitiveness.   

What are the top leading injuries and illnesses?  A 2004 report by Liberty Mutual which underwrites workers compensation insurance listed the top 10 injuries that account for approximately 88 percent of the wage replacement and medical payment costs borne across industries.  The top three which make up half of the cost are 1) overexertion (excessive lifting, pushing, pulling, holding, carrying or throwing of an object), 2) falls on same level, and 3) bodily reaction (bending, climbing, slipping or tripping without falling).  Although this index does have a breakdown by industry, the National Institute for Occupational Safety and Health (NIOSH) shows construction rates higher than average for overexertion and bodily reaction than private industry.

Due to these increased costs and potential litigation associated with worker’s injuries and illnesses, owners are becoming more concerned about construction safety. 

 The Business Owner’s Role 

There have been a lot of studies about safety in construction, especially with contractors who play such a key role in controlling safety at a worksite.  Only recently has there been any research on the influence of owners on safety.  A 2006 study by Huang and Hinze in the Journal of Construction Engineering and Management, concluded that owners can positively influence project safety performances beyond the role of just financially supporting safety measures by becoming more involved in daily safety activities.  This column outlines a few of the factors associated with safety performance:  project characteristics, the selection of contractors, inclusion of safety provisions in contracts, and owner’s involvement in managing safety performance during the construction phase.

Data from the types of projects evaluated in the study, showed shutdown projects have poorer safety performances than other types of projects dues to tight schedules, overtime, multiple shifts, and possible need for new workers that require training.   The study did not have sufficient evidence to compare residential and commercial construction; however, data tended to rate these projects not as good as manufacturing projects which also did not rate as well as petrochemical projects.  The data also showed that design-build projects had significantly better safety performances than other forms of contracting arrangements.  Design-build firms have a greater incentive to consider safety since their employees are the ones impacted.

Second, in addition to project characteristics, owner’s who placed a higher priority on safety when reviewing contractor performance also had better safety performances.  Those private industry owners who used total recordable injury rate (TRIR) of less than 2, versus experience modification ratio (EMR), showed significantly better safety performance.  In addition to using stringent thresholds, owners with better performance also reviewed the qualifications of the contractor’s safety program, reviewed the qualifications of safety personnel, and project management team.

Third, safety performance improved significantly if owners addressed safety requirements in their contract.  Specifically, requiring contractors to place one full-time safety representative on site and submit the qualifications of key safety personnel for owner’s approval.

Finally, owners who were personally involved in safety management influence safety performances.  These activities included participating in safety recognition, monitoring of performance, funding safety initiatives, reporting and investigating accidents, and training and orientation.

The study also highlighted other observations, but they all underscored the fact that those owners who personally valued safety and incorporated into the company’s culture, took accountability for the safety of the group, and personally went out and inspected work sites all were characteristics involved in those construction projects with good safety records.

Taking the time to integrate safety into every aspect of the business pays off in many direct and indirect ways.  Creating metrics that shows how well safety programs affect costs such as workers compensation, medical premiums, time associated with investigating and reporting of incidents, employee morale, and damage to the company image and reduced competitiveness, would provide owners important information on how well their safety initiatives affect these costs.

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Kelly Lewis, SPHR, CCP of Allied HR Consulting in Bellingham is a member of the Mt. Baker Chapter of Society of Human Resource Management (SHRM).  The chapter is a non-profit organization for the advancement of the human resource management through the membership of business, education, and government professionals who are engaged in a broad scope of human resource management activities.  Professionals are from both private and public sector organizations serving Whatcom County and the surrounding area.  The chapter does not provide legal advice.  Please contact an attorney about this information. Website:  www.mtbakershrm.com