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Study question
Workplace injuries and sicknesses have major effects on the profitability of an organization. Employers pay for the compensation costs of their workforce. The expenses of work related injuries and illnesses include both direct and indirect costs. Direct costs account for medical expenses, legal services and compensation payments for members of staff. Indirect costs include lost productivity, accident investigation, repair of damaged equipment and lower employee absenteeism.
Direct costs are the payments required for personnel injury. The direct costs associated with staff injuries are estimated at $3600000. These costs may be paid through insurance systems because they can easily be computed. Companies can have suitably designed insurance policies to cover the costs. However, the indirect costs accumulated to $39600000. These costs are higher and present a challenge in calculation. The total cost incurred by the firm is $75600000. The nature of the compensation mechanisms in an organization also affects the extent to which companies pay the direct costs. Workforce productivity influences the overall level of sales in the firm. However, workplace injuries reduce the levels of sales through the costs incurred ultimately affecting the profit margin.
Injuries at the workstation reduce organizational performance. The lack of productivity and absenteeism among employees created a gap in the sales volume. Approximately $19800000 in sales is required to cover the indirect costs of injuries. An additional $180000000 is needed to cater for the direct costs. Both costs result in a cumulative $378000000 of sales required to cater for the expenses. The organization must increase the sales volume to boost or maintain the profit margin. It is important for organizations to provide safe and conducive environments at the workplace. This will reduce the overhead costs incurred during compensation.