March 18, 2025  | Kyle Brown

At first glance, the prospect of developing and implementing a safety program to comply with regulations and ensure employee safety can seem daunting and expensive. However, a well-structured safety program goes beyond mere compliance—it can significantly impact the company's bottom line, resulting in a compelling return on investment (ROI). Understanding this ROI involves analyzing both the direct and indirect benefits that a safety program brings to an organization.

Direct Financial Benefits

One key benefit to a safety program is the reduction in workplace injuries and illnesses. In my experience, having a productive safety program will lead to a healthy safety culture. This is because all employees on staff are following preestablished safety protocols and taking the time to assess risk. Even if they are not directly part of the safety program, they are still engaged in best practices developed and implemented by those who are.

One example I like to give involves imagining an icy walkway leading to the building. Let's say there are 30 employees at this organization, and all of them walk on this icy walkway. Statistically speaking, out of those 30 employees, a portion are likely to slip, and out of that portion who slip, another, smaller portion are likely be injured. However, if a safety program is in place that created a policy instructing employees to remove ice on sight, and if there is a good safety culture in place which motivates the team to follow the safety policy, then the first employee who walks on or past the ice will remove it. What’s the result? The other 29 employees who represent 29 possible chances of a fallen injury are no longer at risk.

This is just one scenario, but it can be applied to a wide variety of risks that arise from hazardous work, office tasks, or driving a district vehicle.

But how does this improve the districts bottom line?

Simply put, a reduction in injuries means a reduction in claims, which means a reduction in your coverage contributions. This also means reduced costs incurred via medical expenses. If your deductible for a workers’ compensation claim is $5,000, then any injury below that amount will have to be paid for by your organization, and those cost can add up quickly. Finally, a reduction in injuries can reduce the legal cost associated with injuries and injury settlement. The takeaway here is the same as it is for injury and claims reduction: the best way to mitigate legal cost is to make sure the event never occurs.

From my time working in loss prevention, I have noticed that as injuries decrease, productivity will often improve. This is due to a number of variables, including a reduced number of employees being on leave for injury, a reduced strain of having to train someone to do the injured employees’ task, and an increase in morale when employees see their organization taking steps to protect their health and safety and are not putting them in situations that will cause them to be injured this will lead them to be more.

Overall, there is more to be gained from developing and implementing a safety program than to deal with the consequences that result from being without one.

Measuring ROI

To quantify the ROI of a safety program, companies should track specific metrics before and after implementation. These may include:

• Incident Rates: Frequency of workplace injuries and illnesses.
• Workers' Compensation Costs: Amount spent on workers' compensation claims and current vs past experience modifiers (EMODS).
• Medical cost: Injuries not submitted to insurance and deductible cost
• Employee Turnover Rates: Percentage of employees leaving the company.
• Productivity Metrics: Output per employee or per hour worked.

By comparing these metrics, companies can determine the financial impact of their safety programs. For instance, a significant drop in incident rates and workers' compensation costs post-implementation can be directly attributed to the safety program, showcasing a positive ROI.

Case Study #1: A Practical Example

For this hypothetical example, let’s pretend that you work at an organization in a position that requires lifting a 40 lb. box three times an hour for four hours, twice a week. Over the past years there have been three lower back injuries, each resulting in a $8,000 claim.

One proposed solution to mitigate the costs associated with this injury is to buy a device that will do the lifting for the employee. The device will cost $20,000, require $1,500 in maintenance expenses, and increase the utility bill by $2,000 yearly. Is this a good investment for the organization?

To decide, it is important to consider a few details. The organization has been annually spending $24,000 in injuries for the task. The device will only cost the district $23,500, so the district will be saving by investing in the lifting equipment. Even if the device costs more than the injuries, you would still want to consider the device, because indirect ROI factors such as employee morale, employee retention, and increased productivity may increase the return on investment.

Case Study #2: Calculating ROI:

Now, consider an organization with 50 employees that implemented a comprehensive safety program, including regular training, hazard assessments, and ergonomic improvements. Before the program, the company experienced an average of 10 incidents per year, with associated costs of $100,000 annually. After implementing the program, incidents dropped to five per year, reducing costs to $50,000 annually. Additionally, employee productivity increased by 10%, and employee turnover decreased by 15%.

Here is how you can calculate the ROI to determine if the implementation of a robust safety program is worth the effort, time, and costs:

• Savings in Workers' Compensation Costs: $50,000 annually.
• Increased Productivity: If the district generated $1 million in revenue annually, a 10% productivity increase adds $100,000 to the bottom line.
• Reduced Turnover Costs: Assuming it costs $25,000 to replace an employee, a 20% reduction in turnover (10 employees leaving annually) saves $50,000.

Pulling from the information above, we can calculate our total annual savings, also known as our “Gain From Investment” as = $50,000 + $100,000 + $50,000 = $200,000.

To view this formula in another way, let’s assume the annual cost of the safety program, or our “Cost of Investment” is $150,000. Now, the ROI can be calculated as follows:

ROI = 

Gain from Investment - Cost of Investment

Cost of Investment

ROI = 

200,000 – 150,000

150,000

ROI = 

Gain from Investment - Cost of Investment

Cost of Investment

ROI = 

33%

As a result, this substantial ROI of 33% highlights the financial benefits of investing in a safety program.

With this hypothetical, we hope to show that you can use this formula to calculate if an investment is beneficial or detrimental to your bottom line.

Conclusion

A robust safety program is not merely a compliance requirement but a strategic investment that can lead to significant financial returns. By reducing workplace injuries, enhancing productivity, and improving employee morale, companies can achieve a substantial ROI. Therefore, investing in safety is not only a moral and legal obligation but also a smart business decision that pays off in the long run.

If you would like to learn more about implementing a safety program or would like to request a complimentary safety consultation or training, email safety@csdpool.org.