Donnie Johnson was an electrician who knew his job well. On August 12, 2004, he learned that was not enough to keep him safe. After wiring a large generator into a warehouse’s electrical system, he energized the system and connected his meter to test the rotation of the generator. He made two critical mistakes. He did not bother to put on his personal protective equipment (PPE), because, after all, he knew what he was doing and “all that gear is so hot and bulky,” and he did not realize that the meter he was using was not rated for live circuits.

The meter failed, spewing carbon into the electrical gear, and triggered an arc flash with a temperature seven times higher than the surface of the sun. Second- and third-degree burns covered his arms, neck, and face, disfiguring him to the point that when his wife rushed to see him in the hospital she only recognized him by his work boots. Over the next several months he went through multiple surgeries, suffered viral and bacterial infections, and, as his throat had closed, could only receive sustenance through an IV tube.

Donnie’s recovery took nearly two years, including over eighteen months of painful physical therapy, and he carries multiple scars and nerve damage to this day. This incident carried a lot of costs, both financial, physical, and emotional, for Donnie himself, Danny’s family, and the company where Donnie worked.

Donnie is not alone. Construction workers face injuries that are more severe, more frequent, and more expensive that the average worker, both in the United States and globally. The European Agency for Safety and Health at Work says that construction is the most dangerous industry in Europe, while globally construction workers are three times more likely to die and two times more like to be injured at work than the average worker (Sousa, et al).A 2007 study estimated that in the United States construction injuries accounted for fifteen percent of all occupational injury expenses, though construction only employs a little over five percent of private workers (Waehrer, et al).

Incidents in construction are not always as costly as what happened to Donnie, but there is nearly always a price to pay. This paper will consider the costs of incidents in construction for employers, both financial and human, the long-term consequences for employers, and briefly discuss strategies to prevent accidents and thus reduce costs. The focus of this paper is on construction, but incidents are costly in all industries.

Incidents, costs, and mitigation

What is an incident and what kinds are there?

To discuss the costs of incidents, first it is necessary to define the term. In the safety field, “incident” is often a catch-all term that includes events that cause accidents and those that could potentially cause accidents, such as unsafe acts and near misses.

So, what is an accident? According to Occupational Health and Safety Administration (OSHA), it is an “undesired event causing injury or property damage.” The Health and Safety Executive (HSE) in the United Kingdom focuses more on injuries, defining an accident as “a separate, identifiable, unintended incident, which causes physical injury.” If one is using the OSHA definition, it is a good idea to keep in mind that an accident with only property damage could very well have caused injury if the situation had been only slightly different, so a safety professional should treat a no-injury accident just as seriously as if someone had been hurt.

A near miss is, again according to OSHA, an incident “where no property was damaged and no personal injury sustained, but where, given a slight shift in time and position, damage and/or injury easily could have occurred.” In other words, it is an incident that almost became an accident and easily could have. As for unsafe acts: these are actions that are inherently unsafe, but do not rise to the level of a near miss or an accident.

Low-level incidents such as unsafe acts and near misses have minimal costs associated with them, but they cannot entirely be discounted because of their potential to escalate into high-level incidents, i.e., accidents.

Types of Costs

Traditional Financial Costs Categories

When breaking down what an incident will cost a company, financial costs for accidents are usually broken down into two categories: direct and indirect. Direct costs are costs directly associated with an incident, such as medical expenses, and indirect costs are harder to quantify effects, such as lowered employee morale.

While some expenses are easy to categorize, often it can be difficult to figure out exactly where an expense lies. Even experts in the subject can become a little fuzzy in their definitions or categorizing. For example, Dr. M. Rashad Islam in Construction Safety: Health, Practices, and OSHA, says “Direct costs of accidents are those covered by insurance.” Dr. Islam immediately contradicts this definition by giving a list of direct costs, including an increase in worker’s compensation and general liability insurance premiums. Both statements cannot be true, as insurance policies do not cover the cost of increased insurance premiums.

To further muddy the waters, Dr. Islam then states that money spent on medical treatment are direct costs while first aid is indirect, and repairing damaged equipment is a direct cost but “clean-up, preparation and replacement costs of damaged materials, machinery and property” is not. The former can perhaps be attributed to the fact that medical expenses would be directly billed to the company, and perhaps insurance will cover them, while first aid supplies are bought ahead of time and accounting considers them part of the overhead rather than allocating the costs to specific incidents. As for the latter, maybe repairing the damaged equipment would be contracted out to a third party, with a clear invoice, and the “clean-up” would be completed with in-house staff.

Whether or not these explanations are the rationale for inclusion in either category, the traditional dichotomy of classifying expenses as either direct or indirect can be difficult to navigate. After all, a bandage in a first aid kit costs money, and using that bandage is an expense that can be laid clearly on the accident, no matter the accounting department’s proclivities.

Re-Categorizing and Discussing Financial Costs in Construction

I would propose that two categories of financial costs – direct and indirect – are insufficient. There should be three categories:

Direct costs – Easily quantifiable costs that are incurred directly because of an incident. Direct costs would be “expenses with receipts,” or easily tracked expenses.

Examples of direct costs: hospital and doctor bills, replacing damaged equipment, legal settlements.

Middle costs – Costs that are incurred by an incident, and can be quantified, but not easily. A raise in insurance rates would be a middle cost. An accident can be shown to raise insurance rates, but it is one of many variables in the final cost and would have to be broken out of the financial reports to quantify the numbers exactly.

To demonstrate how middle costs would work, let us consider a common cost incurred because of an accident – an accident investigation. If an investigation is contracted out to a third-party, there will be an invoice sent and thus is a direct expense, but if the investigation is completed in house, are these expenses quantifiable, and if so, how easily?

The hypothetical investigation will consist of employees spending their time on the project, and the amount of hours they spend can be tracked. Figuring the hourly rate of the employees is simple math, but the true labor cost of the project is not actually the dollar amount the employees would earn for the time spent. After all, these people are already employed and this cost would have been paid by the company anyway. The true cost would be productivity lost on whatever other projects these employees would be working on if the accident had not occurred.

The value of the lost productivity can be measured, but it is a formula with many variables. The projects with missing productivity – will they be canceled or just postponed? Will that work be pushed off onto another employee, and if so, will it be done as proficiently as the original employee would have done it? What productivity is that employee losing on other projects? Will any projects need overtime to complete, and if so, which employees will be getting it? Will there be any loss of revenue or added expenses because the original projects were not completed as scheduled?

As these are variables that can be measured to one extent or another, and the final cost quantified to at least a close approximation, the in-house accident investigation would qualify as a middle expense under the proposed categories of financial costs.

Examples of middle costs: administrative costs, raised insurance premiums, lowered productivity due to missing worker or equipment, recruitment and training to replace injured workers.

Indirect costs – Costs incurred by an incident that are known, but that cannot be quantified in the real world. Low employee morale is a good example, as it can be demonstrated that low morale lowers productivity and raises costs, but the exact dollar amount cannot be calculated in a real-world environment with changing variables.A loss of reputation would fall under this category as well. A company known for its poor safety may have trouble finding business partners, but it may not know exactly how many potential partners it has lost – only that the loss has occurred.

Examples of indirect costs: lowered morale, lowered service standards, reduced community goodwill.

Total Financial Cost of Accidents in Construction

It is hard to pin down an exact number of how much accidents cost, both in general and specifically, for a number of reasons. Different studies use different methodologies, middle and indirect costs may not be fully realized, many studies use Worker’s Compensation data (which does not include self-employed workers), and it is widely believed that many accidents are not reported. Some reports claim that the true rate of injuries is two to three times the reported amount, with one report by the United States House Committee in Education and Labor calling under-reporting a “hidden tragedy,” further stating that almost 70 percent of amputation are not reported properly to OSHA.

That said, construction injuries cost employers millions of dollars annually. In 2007 it was estimated that the average cost of a single construction injury was $27,000 (compared to $15,000 across all industries).In 2010, OSHA calculated that an average laceration would cost $32,000, while a severe back injury could cost $180,000.These costs represent money that a company cannot spend on building assets or productivity, because this money is instead being used to pay for safety incidents.

The numbers quoted above may be hard to find on the company balance sheet. Economists, using the traditional delineation of direct and indirect costs, estimate the indirect costs of an incident are often four to seven times higher than direct costs. (Waehrer, et al).Studies have not been done using a direct cost / middle cost / indirect cost methodology, but as middle costs incorporate items that have traditionally been categorized as both direct and indirect, combined middle and indirect costs would have an even higher rate versus direct costs than the four-to-seven figures commonly reported for indirect costs.

The Human Cost

Donnie Johnson’s story of nerve damage and scarring tells us what the human cost of an accident can be. In one moment of carelessness he turned the next two years of his life into painful agony, not just for himself, but for his family as he slowly recovered.

Injuries can end up causing chronic pain, disability, or psychological trauma. As such, pain and suffering are genuine costs of an accident. Another factor to consider is the loss of work an injured employee can no longer do at home. His tasks either have to be done by others, or not be done at all, lowering the quality of life for the entire household. An accident does not just injure the affected employee but also hurts those he loves.

How much does it cost? Studies have been done to estimate the quality-of-life costs of an accident, but it is difficult to assign a dollar cost to pain, suffering, and deprivation. One method used in many studies to determine quality of life costs is based on the difference between what courts and juries award injury victims in liability lawsuits and the out-of-pocket costs claimed by the employer. Using this formula, the dollar amount determined is the approximate cost the injured employee pays, not the employer. These approximate values are often used in determining additional indirect costs to an accident .

Long-Term Consequences / Costs for Employers

Aside from the immediate costs of an incident, employers can face long-term financial losses. Insurance premiums will almost certainly rise. If an accident is severe enough, government regulators may become involved in the investigation or increase scrutiny of the company, increasing administrative costs and potential fines for non-compliance. Lawyers and litigation are a possibility, which can potentially drag on for years, devouring the time, money, and focus of the company.

The indirect cost of loss of reputation comes into play when the long term is considered. Reputational damage lingers. Potential customers may go elsewhere. It may be harder to recruit new employees. This all leads to a loss of competitiveness and can drastically hurt profit margins.

Safety Strategies for Reducing Costs

Providing a safe workplace for employees and minimizing the possibility of accidents is an ethical obligation, a regulatory requirement, and a sound business practice. Implementing safety programs that use risk management to reduce the number of incidents will lower all costs associated with incidents: direct, middle, and indirect.

Several measures can be taken to reduce and eliminate hazards that may create accidents in the workplace. A few of them include:

1. Cultivate a safety culture – The importance of leadership commitment to safety cannot be understated. By setting expectations and setting the example that safety matters, management is taking the stance that accident-prevention is important. When management sets the tone, employees will follow.
2. Create and implement a safety policy – The safety policy should be specific to the organization and clearly outline safety goals and how to achieve them. A safety plan should include elements such as training, hazard assessment, and emergency response plans.
3. Focus on training – Training in hazard recognition and workplace safety is paramount. Workers should know what the hazards are, how to avoid them, how to report them, and what to do if an incident occurs. Training should be systematic and documented.
4. Encourage worker participation – Workers are the people most exposed to safety hazards, and management would be remiss if it did not gather worker feedback in regard to hazards in the workplace. Workers should be able to, and be encouraged to, report hazards and incidents on the job without fear of retaliation. An organization cannot investigate incidents, near misses, nor take steps to eliminate hazards, if it does know what the issues are.
5. Always be improving – The organization needs to regularly assess its safety program and culture. Audits and incident investigations should be taken seriously and reviewed on a continuous basis, and appropriate action taken. Having the reports means nothing if nothing is ever done about them.

By using these methods, and others, to reduce risks and hazards in the workplace, the costs saved from reduced incidents will more than offset the costs of implementing the programs.

Conclusion

Incidents in construction are expensive. An employer has to consider not just financial costs – direct, middle, and indirect – but the human cost. Direct costs (“expenses with receipts”) are immediately visible, but measure only a fraction of the total. Indirect and middle costs, such as lost productivity, administrative overhead, and loss of reputation, may be four to seven times as high as immediate expenses, or even more. Having to pay the costs of workplace injuries can dramatically hurt a company’s well-being, and the human costs, exemplified by Donnie the electrician’s scars and measured in pain and suffering instead of dollars, should motivate companies to look beyond the pocketbook and take safety seriously as an ethical obligation.

Employers, in both construction and in other industries, should recognize these costs and take steps to reduce and eliminate them. By investing in safety training, creating and maintaining a safety culture, and learning from near misses and hazards reported in the work site, these employers can substantially reduce the number and severity of incidents in a workplace. The rewards are worth the investment: lower costs, stable productivity, enhanced reputation, and most importantly, everyone goes home safely at the end of the day.

References (Read what I read to write this)

“Donnie Johnson: The Story of an Arc Flash Survivor.” Donnie’s Accident, www.donniesaccident.com. Accessed 6 Sept. 2025.

Islam, M. Rashad. Construction Safety: Health, Practices, and OSHA. McGraw Hill, 2021.

Karmel, Jonathan D. Dying to Work: Death and Injury in the American Workplace. Cornell University Press, 2017.

Kossos, John, Certified Safety Professional; Safety, Health & Environmental Professional. Personal Interview. 19 Aug. 2025.

Marriott, Craig. Challenging the Safety Quo. Routledge, 2018.

Pieron, Helen. “Why Cost-Cutting Safety May Cost You More.” Occupational Health and Safety Magazine, 1 Apr. 2010.

Sharman, Andrew. From Accidents to Zero: A Practical Guide to Improving Your Workplace Safety Culture. 2nd ed., Routledge, 2016.

Sousa, Vitor, Nuno M. Almeida, and Luís A. Dias. “Risk-Based Management of Occupational Safety and Health in the Construction Industry – Part 1: Background Knowledge.” Safety Science, vol. 66, 2014, pp. 75–86. ScienceDirect, https://doi.org/10.1016/j.ssci.2014.02.008.

Waehrer, G. M., X. S. Dong, T. Miller, E. Haile, and Y. Men. “Costs of Occupational Injuries in Construction in the United States.” Accident Analysis and Prevention, vol. 39, no. 6, 2007, pp. 1258–66. PubMed Central, https://doi.org/10.1016/j.aap.2007.03.012.

– Douglas Stephens