Workplace Injuries and Cost of Goods Sold

by | Dec 18, 2015 | Workers Compensation

As a manufacturer you work hard to keep your costs of goods sold at a minimum. It’s what helps you maintain your competitive edge and ability to win jobs, which in turn impacts your bottom line. Often times a manufacturer can lose a bid by as little as a penny per item. What I would like to discuss is workplace injuries and their relationship to your Total Cost of Risk (TCOR). Additionally we will cover a few solutions that may have a positive impact to your TCOR.

Workplace injuries and cost of goods soldTCOR is an insurance acronym used to describe both direct and indirect costs associated with many areas of risk within an organization. Here we are going to focus solely on workplace injuries and their effects on your business and its cost of goods sold.

The most obvious influencer to your cost of goods sold is your workers compensation premium. The premiums are calculated every year based on claim history (severity and frequency of losses), and potential payroll. This is a cost that can be easily calculated into your cost of goods sold as the rate is set every year upon renewal.  Other examples are medical expenses and legal services. This is the direct impact of your cost of goods sold.

On the indirect side, you have far more complicated costs to consider. Many times these costs can be unknown or fluctuate in rate; therefore they pose the most threatening impact to your bottom line. Examples of these losses include:

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  • The training of replacement employees
  • Cost of investigating the accident
  • Implementing corrective solutions
  • Lost in productivity
  • Costly unintended repairs of equipment/property
  • Low employee moral
  • Absenteeism
  • Harm to reputation


Some example solutions to consider when reducing your TCOR in regards to workplace injuries include the following:

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  • Implementing a successful safety program
  • Create how-to training opportunities
  • Surveys and assessments
  • Submit to a voluntary OSHA inspection (crazy I know, but this will also help you eliminate any unforeseen fines)
  • Formal return to work programs
  • Formalize a relationship with a occupational health facility


And the list goes on…

*Keep in mind that these solutions will impact both direct and indirect costs.

There are many other solutions to consider and most of them require a custom approach. Creating a worthwhile program has an associated cost in time & money, but consider the cost of doing nothing. Think of the ROI of an effective safety program and culture can yield.  Various studies have shown that $1 spent on prevention has a returning yield ranging from $2-$6.

Workplace injuries are just a single area of risk affecting your total cost of goods sold. Working with a trusted and experienced advisor in your industry is crucial to implementing a successful program and plan. At FBinsure we work with businesses every day addressing risk and implementing successful plans. We pride ourselves on being trusted advisors to our clients.

Please see below for a list of references and helpful links in relationship to managing workplace injuries in your business.    If spending time on a conversation now that could save you a much larger headache down the road sounds good, let’s get a cup of coffee.

References and helpful links:



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