Corporate Safety Shoe Programs: How to Calculate the Program’s ROI
As many businesses are finding out, one surefire way to reduce workers’ comp costs is to adopt a corporate safety shoe program. Depending on the size of your company, you could save millions of dollars each year in job-related costs related directly to slips and falls.
But what would be the return on investment for a corporate safety shoe program at your place of business?
To uncover the ROI of corporate safety footwear program, you’ll need to:
Step 1: Research your company’s history of slip and fall claims
Step 2: Anticipate the slip and fall rate for the upcoming year
Step 3: Combine the claims history and the upcoming year’s anticipated rate
But how do you plug this into an ROI calculation?
To understand that, it’s essential to know how corporate safety shoe programs work.
What Is a Corporate Safety Shoe Program?
When you adopt a corporate safety shoe program, you select a safety shoe provider to become your partner toward a common goal: sustainably reducing job-related slip and falls.
For the ROI calculation below, assume that your employees use the company-paid program with the highest (72%-80%) reduction rate concerning slip and falls.
Transforming the Basic ROI Formula
This is the basic ROI formula:
Step #1: Subtract the cost of the corporate safety shoe program from the workers’ comp cost savings
Step #2: Divide the answer in step #1 by the corporate safety shoe program’s cost.
Step #3: Multiply the solution from step #2 x 100.
You may further break down workers’ compensation cost savings into indirect and direct costs savings.
What is the Difference Between Direct and Indirect Workers’ Compensation Costs?
No matter the cause of a workplace injury, you can break down the workers’ compensation cost into direct and indirect costs. While doing so, consider that both types of workplace injury costs impact the employer’s profit margin.
Direct costs are easy to determine as a direct result of the injury. For example, direct costs include:
- Workers’ compensation payments
- Medical expenses
- Attorney fees and court costs
- Indemnity payments
Indirect costs are uninsured expenses for job-related injuries for which you didn’t budget.
They include losses in the following:
- Expenses of the accident investigation
- Equipment damage
- Team productivity
- Expenses to recruit, hire, and train staff replacements
- Reduced employee morale
Then, of course, there are the fines and penalties that the Occupational Safety and Health Administration (OSHA) may impose for violations of OSHA rules and regulatory guidance.
Estimating the Cost of a Single Slip and Fall
OSHA provides an Injury Estimator to help you determine slip and fall costs. It is called the Safety Pays Tool. To calculate the direct costs from an injury, follow these simple steps for the Estimator.
- Select an injury type from the drop-down menu. Alternatively, you may enter the total workers’ compensation costs
- Either enter your profit margin (or leave it blank if you want to use the 3% default profit margin)
- Insert the number of injuries (or leave it blank if you want to use a default of one)
- Click “Add/Calculate” to compute the total direct and indirect costs
- Repeat the step to add additional injuries to the list
Remember: The cost of a slip and fall event will vary because the individual’s payout depends more on the type of injury (contusion vs. concussion) than the mechanics of how the injury happened (slip and fall vs. car crash).
Determining Expected Slip and Fall Costs
Once you have the direct costs from the Safety Pays Tool, you can then follow additional steps to find the total cost of the workers’ compensation slip and fall injuries:
- Fill in the estimated direct costs
- Fill in the estimated indirect costs
- Calculate the combined direct and indirect costs
- Enter the sales to cover the indirect costs
- Enter the sales to cover the direct costs
The calculator is most accurate when you use information from your OSHA 300 logs, but you may use the tool without doing so.
Finding Your ROI
When a company pays for its employees’ safety shoes, slips and falls plummet by as much as 80%. If you want to see the difference a safety shoe program makes, rerun the Safety Pays tool with 80% fewer slip and fall claims. Subtract the larger number from the smaller one. The resulting number is your workers’ compensation savings. To find your ROI:
- Plug that number into the ROI formula
- Then subtract the cost of the safety shoe program
- Divide the resulting number by the cost of the safety shoe program
- Multiply that number by 100
The answer is the upper boundary of your ROI.
If your workers’ compensation policy covers some direct costs, your ROI combines both direct and indirect costs. Suppose your workers’ compensation policy covers 100% of direct costs. Then, your ROI is the indirect cost savings.
That makes your indirect costs the lower boundary of your ROI.
The actual ROI of your safety footwear program lies somewhere between that upper and lower boundary.
You cannot determine your company’s actual ROI until you know how much of the direct costs your particular workers’ compensation policy covers and the impact of premium increases resulting from workplace accidents.
A Case Study on the ROI of Safety Shoes
In 2006, the University of California at Irvine opted to bring its food service operations in-house. UC-Irvine employs 150 full-time food service employees and 700 student employees. As part of that change, UC-Irvine participated in a Shoes For Crews’ corporate safety footwear program that provided slip-resistant shoes to food service employees.
The annual investment in the shoe program was $16,000.
Based on experience, the UC-Irvine slip and falls were projected at 50 accidents annually. The actual slip and fall experience after instituting the Shoes For Crews program is only two workplace claims per year. That is a reduction of 75% within the first year of operation.
The average slip and fall claim costs around $9,000, so UC-Irvine estimates it saves $400,000 in direct workers’ compensation costs annually due to the shoe program. Considering both direct and indirect costs, UC-Irvine expects to see $3-$5 million in savings annually.
Most importantly, at a human cost level, UC-Irvine expects to reduce an average of 400 employee injuries annually.
Check out our website for additional information on the Shoes For Crews safety footwear program. You may also contact one of our safety experts via phone at 1-877-NO SLIPS (1-877-667-5477).