Save Your Business Money by Having a Safety Budget
The consequence of no budget is obvious. When a safety issue arises, it is often ‘out of the blue’ and unprepared companies end up digging into meagre profit margins to pay for them.
Safety Budgets work so effectively because someone has actually given some time and thought as to what safety issues, and therefore costs, will be relevant for different projects.
How can a business budget for Safety?
1. Review safety costs from similar projects.
o Make this easier by creating a ‘safety’ category for your accounts.
2. Do a Task Analysis on the project (before it is tendered!)
o The Task analysis predicts what hazards are and how they will be
controlled.
o The cost of controlling the hazards should be researched and budgeted at
this point.
o Get professional advice! A safety advisor or consultant can assist in
predicting safety pitfalls, and recommend efficient/effective means to
avoid or control them.
3. Understand what safety costs.
o Weigh the costs of owning versus leasing/renting safety equipment.
o Factor in the time of maintenance of the safety equipment.
o Factor in the time for training on the relevant safety equipment.
4. Amortise the cost of safety equipment that will be used on other projects.
5. Pass the costs on to the clients/consumers.
Steps 1-3 are effective accounting and business discipline techniques. Used consistently and reviewed regularly, these techniques will take the guess work out of the safety budget. It is true to say that guessing and hoping are not very effective business techniques.
External advice on safety can give your company a much more honest and effective focus for your budgeted safety money.
Steps 4 and 5 are Paradigm shifts for many companies, especially smaller contractors. The cost of safety, including safety equipment, needs to be a line item expense when calculating the tender/ manufacturing costs.
Example:
A project may require a contractor’s worker to come onto a construction site for 3 days. The site Personal Protective Equipment (PPE) requirements are: Hardhats, Hi-Viz vest, Safety Glasses, and Safety Shoes.
What is the cost to the employer?
Materials
Labour
PPE
Perhaps induction training time for the site
Company overhead
Administration
Payroll
Office
Vehicle
Communication
First Aid Equipment
Tools/Equipment
Tools/Equipment maintenance
Accident Insurance (private or Govt. imposed)
Employee training
Safety Induction courses
Training for equipment use
First Aid training
What is charged to the client?
Typically: Parts (Material)/Labour. The cost of “labour” is where the cost
of doing business is recouped.
The Safety costs are often unaccounted for and end up coming directly out of the company’s bottom line.
Especially the PPE! It seems unreasonable to charge out for the cost of a Hardhat, or a pair of safety glasses, when they will only be used on the site for a few days. So they don’t get charged out, and ‘hopefully’ the Labour rates will make up the difference.
Safety Equipment costs money. They are required by the clients and by law, and by common sense, to be used. The cost must be accounted for.
For the Hazardfree Safety Co-op (www.hazardfree.co.nz) I have been working on creating amortisation tables for the different costs for safety equipment.
The example above, (with hardhat, safety shoes, High Viz vest, and Safety glasses) could run a company around $240 NZD (foraverage retail prices)per employee. If the life span of the different items, (hardhat 3 years max etc.) it comes to $22NZD/month/employee.. The Hazardfree Safety Cooperative, with a typical 20% saving off of retail drops that to around $17.60 NZD for this example. That cost has to be accounted for somewhere even if you do get a good deal!
By budgeting for the cost of safety and then putting the costs back on to the client/consumer, safety gets paid for. By not budgeting for safety…The money comes out of the company purse…or worse yet gets sidelined or cut out of the programme completely...and these "little" expenses quietly eat up a large chunk of your profits.
That is why in New Zealand the largest profit margin is touted to be an appalling 3% on for commercial constuction projects.
Glen Omvig
All Practicable Steps (APS) Ltd
Hazard Free Safety Co-Op
Safety Budgets work so effectively because someone has actually given some time and thought as to what safety issues, and therefore costs, will be relevant for different projects.
How can a business budget for Safety?
1. Review safety costs from similar projects.
o Make this easier by creating a ‘safety’ category for your accounts.
2. Do a Task Analysis on the project (before it is tendered!)
o The Task analysis predicts what hazards are and how they will be
controlled.
o The cost of controlling the hazards should be researched and budgeted at
this point.
o Get professional advice! A safety advisor or consultant can assist in
predicting safety pitfalls, and recommend efficient/effective means to
avoid or control them.
3. Understand what safety costs.
o Weigh the costs of owning versus leasing/renting safety equipment.
o Factor in the time of maintenance of the safety equipment.
o Factor in the time for training on the relevant safety equipment.
4. Amortise the cost of safety equipment that will be used on other projects.
5. Pass the costs on to the clients/consumers.
Steps 1-3 are effective accounting and business discipline techniques. Used consistently and reviewed regularly, these techniques will take the guess work out of the safety budget. It is true to say that guessing and hoping are not very effective business techniques.
External advice on safety can give your company a much more honest and effective focus for your budgeted safety money.
Steps 4 and 5 are Paradigm shifts for many companies, especially smaller contractors. The cost of safety, including safety equipment, needs to be a line item expense when calculating the tender/ manufacturing costs.
Example:
A project may require a contractor’s worker to come onto a construction site for 3 days. The site Personal Protective Equipment (PPE) requirements are: Hardhats, Hi-Viz vest, Safety Glasses, and Safety Shoes.
What is the cost to the employer?
Materials
Labour
PPE
Perhaps induction training time for the site
Company overhead
Administration
Payroll
Office
Vehicle
Communication
First Aid Equipment
Tools/Equipment
Tools/Equipment maintenance
Accident Insurance (private or Govt. imposed)
Employee training
Safety Induction courses
Training for equipment use
First Aid training
What is charged to the client?
Typically: Parts (Material)/Labour. The cost of “labour” is where the cost
of doing business is recouped.
The Safety costs are often unaccounted for and end up coming directly out of the company’s bottom line.
Especially the PPE! It seems unreasonable to charge out for the cost of a Hardhat, or a pair of safety glasses, when they will only be used on the site for a few days. So they don’t get charged out, and ‘hopefully’ the Labour rates will make up the difference.
Safety Equipment costs money. They are required by the clients and by law, and by common sense, to be used. The cost must be accounted for.
For the Hazardfree Safety Co-op (www.hazardfree.co.nz) I have been working on creating amortisation tables for the different costs for safety equipment.
The example above, (with hardhat, safety shoes, High Viz vest, and Safety glasses) could run a company around $240 NZD (foraverage retail prices)per employee. If the life span of the different items, (hardhat 3 years max etc.) it comes to $22NZD/month/employee.. The Hazardfree Safety Cooperative, with a typical 20% saving off of retail drops that to around $17.60 NZD for this example. That cost has to be accounted for somewhere even if you do get a good deal!
By budgeting for the cost of safety and then putting the costs back on to the client/consumer, safety gets paid for. By not budgeting for safety…The money comes out of the company purse…or worse yet gets sidelined or cut out of the programme completely...and these "little" expenses quietly eat up a large chunk of your profits.
That is why in New Zealand the largest profit margin is touted to be an appalling 3% on for commercial constuction projects.
Glen Omvig
All Practicable Steps (APS) Ltd
Hazard Free Safety Co-Op
posted by Clare and Glen | 8:15 PM
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