Accident costs – Direct and Indirect costs of accidents

By | May 25, 2021

Accident costs:

Accident costs: Accident cause enormous crisis directly or indirectly. The losses incurred due to accidents could be visible as well as invisible. Certain losses can be evaluated in terms of money whereas certain Diner losses cannot be evaluated in monetary terms. Whenever an industrial accident occurs, it gives se to pain for the victim and his family and retards industrial productivity which in turn, affects the very economic base of the industry. In addition to this, compensation to be paid to the employees involved in an accident is enormous.

The management suffers losses involving

1- Direct costs

2- Indirect costs.

 Direct costs of accident:

The wages of employees is six to ten times the normal wages because of the loss of goods and services, compensation and the cost of medical aid, the cost incurred on training a new worker, loss due to waste of raw materials; and loss of production and quality arising out of the inexperience and lack of skill of the new employee.

Accident costs


Indirect costs of accident:

  • The cost which the government has to incur because it has to maintain a larger number of factory inspectors to check accidents and it has to spend more on the employee’s health insurance and other social security benefits and the cost of all these is recovered by imposing higher taxes on the people.
  • Cost of the employee time because he has been without work because of his accident.
  • The cost of the lost time because other employee stop work; Out of curiosity, out of sympathy with the injured employee. Or because they have to assist the injured worker.
  • The cost of time lost by a foreman, a supervisor or other executive while assisting the injured employee, investigating the cause of the accident. Arranging for his replacement, selecting and training a new employee. Preparing the accident report, and attending hearings conducted by government or other officials;
  • Cost incurred on the machine or tools that might have damaged, and/ or the cost of the spoilage of material when the accident occurred.
  • The loss of profits on the production which the injured employee would have responsible for, including the loss incurred because the machine on which he working idle;
  • Cost incurred on account of the wages paid to an employee; during the period in which he was idle following his injury. And even after his return to work. When his production would be worth much less than it was before he sustained the injury:
  • The loss due to the weakened morale of the other employees following the occurrence of the accident and the consequent lower productivity throughout the plant.

Overhead costs:

The expense incurred on light, heat, rent and such other items. Which continue to used while the injured employee is a non-producer.

Related posts:-