Purpose: To assist in the representation of Health & Safety (H&S) losses or savings as SE$. This will enable a person to demonstrate to general management the TRUE costs or savings of H&S dollars. LEARN MORE. General management does not realize the additional dollars required in sales to offset an H&S expense. Please also check out the “Safety Pays Calculator” at the OSHA.gov website.
For example, a $1000 savings or expense for a business operating at a 5% profit margin represents either a SE$ savings or cost of $20,000. And that is for the direct cost alone.
It is widely accepted that the indirect cost is actually 2-4 times greater than the direct cost so if a conservative indirect cost multiplier of just 2X is used that $20,000 actually becomes $60,000. The use of an indirect cost multiplier of 2X can be supported and documented by an extensive study in the Archives of Internal Medicine.
Assume a $10,000 workers comp cost for a business with a 5% profit margin.
SE$ = $200,000. Therefore it requires additional sales of $200,000 to offset the $10,000 loss.
Simply take the direct cost in SE$ and multiply it by 2 to arrive at the indirect cost.
$200,000 X 2 = $400,000
Then add this indirect cost to the direct cost.
$200,000 direct cost + $400,000 indirect cost = $600,000 total sales to offset the initial $10,000 cost.