Examples
You can use the QuickScan Work Safety to calculate rates of return and payback periods of your company's investments in work safety. Part of the costs involved in improving work safety is covered by subsidies from the Dutch programme for improving occupational safety (Ministry of Social Affairs and Employment). Below, we describe two examples of work safety programs and the results from calculations in the QuickScan.
Example Meat producing industry
The total cost of intervention in this example amounts to 80,000 euro. These costs are equally split between subsidization and the own investment of the participating company. Again, the material damage per accident is not known. In the calculation of payback periods and rates of return, the average value added per FTE in sector 5 (Meat and meat products) will be used (54,800 euro). The employment involved in this safety project equals 750 man-years. Every year, 25 workers are injured in a work accident. The safety program aims at a reduction of the number of injuries by 7, or 28 percent.
Input:
Output:
The potential saving of costs, based on a reduction of the number of injuries by 7, equals 28,300 euro per year. The reduced loss of production amounts to 4,700 euro.
In Scenario 1, the payback period equals 1 year and 5 months. In this scenario, the reduction by 7 injuries will be achieved immediately after the start of the safety program. This means that the number of injured workers in this program will decrease permanently to 18 injured workers per year. The rate of return in the first year amounts to 71 percent (=cost saving as a percentage of the own investment).
In Scenario 2, the target of the safety program (a reduction of the number of injuries by 7 per year) will be completely achieved after 5 years. Each year, the effect of the safety measure increases with another 20 percent of the target. The payback period in this scenario equals 3 years and 4 months, which is longer than in Scenario 1. This is due to the delayed effect of the intervention in this scenario. One year after the start of the safety program, the rate of return in this scenario (14 percent) is lower than in Scenario 1 (71 percent). Five years after the start of the program, 210 percent of the own investment of the participating companies will be recollected by them by means of lower costs.
Example Fire-brigade
The total cost of this safety program is equal to 275,000 euro. Of these costs, 125,000 euro will be subsidized, which means that the own investment of the participating companies (fire-brigades) amounts to 150,000 euro. The material damage per work accident is not known, the value added per FTE is set to the average value added per FTE in business sector 48 (Fire services activities and emergency services), 28,900 euro. The safety program refers to 800 full time equivalents (man-years), of which 40 workers per year are involved and injured in a work accident. The intervention aims at a reduction of injured workers by 8, or 20 percent.
Input:
Output:
The potential saving of costs, based on a reduction of the number of injured workers by 8 workers, equals 13,600 euro per year. The reduced loss of production equals 2,300 euro per year.heeft € 2.300 betrekking op verminderde productieverliezen.
In Scenario 1, the payback period equals 11 years and one month. In this scenario, the reduction by 8 injuries will be achieved immediately after the start of the safety program. This means that the number of injured workers in this program will decrease permanently to 32 injured workers per year. The rate of return in the first year amounts to 9 percent (=cost saving as a percentage of the own investment).
In Scenario 2, the target of the safety program (a reduction of the number of injuries by 8 per year) will be completely achieved after 5 years. Each year, the effect of the safety measure increases with another 20 percent of the target. The number of injured workers will therefore decrease by 2, 3, 5, 6 and 8 workers per year in the 5 years after the start of the intervention, respectively. The number of injured workers will then be 38 in the first year, 37 in the second, 35 in the third, 34 in the fourth, and 32 in the fifth year. The payback period in this scenario equals 12 years and 9 months, which is longer than in Scenario 1. This is due to the delayed effect of the intervention in this scenario. One year after the start of the safety program, the rate of return in this scenario (2 percent) is lower than in Scenario 1 (9 percent). Five years after the start of the program, only 28 percent of the own investment of the participating companies will be recollected by them by means of lower costs.