IWH estimates point to positive return on OHS investment in three Ontario sectors

The Institute’s method to estimate the ROI of occupational health and safety spending includes intangible benefits

Published: July 29, 2022

While employer expenditures on occupational health and safety (OHS) in Canada can be substantial, the financial benefits of these expenditures are not well understood. To learn more about the range of financial returns on employers’ investments in the prevention of work-related injury and illness, the Institute for Work & Health (IWH) conducted a study estimating the financial benefits that may be realized by Ontario employers who are strong OHS performers.

The study found positive returns for strong OHS performers in the three Ontario sectors it examined: manufacturing, construction and transportation. The findings were based on a set of plausible assumptions used by the study team—a crucial one being an estimate of the intangible benefits of strong health and safety performance.

As part of the study, we asked employers how important the intangible benefits of OHS are. That is, if they’ve worked really hard to have first-in-class policies and practices to prevent work-related injuries and illnesses, do they believe that investment pays them back in terms of employee satisfaction and morale, quality of work or corporate reputation? They all said yes, says Dr. Cameron Mustard, the study lead and former senior scientist and president at IWH. Some told us those are the real payback.

Incorporating that feedback into its set of plausible assumptions, the team found that, for every dollar spent on worker health and safety, manufacturing employers in Ontario with strong OHS performance get back an average of $1.24. Those in construction get back $1.34, and those in transportation recoup $2.14 in benefits.

The estimates in this study are, we think, conservative and consistent with the range of estimates available from research in this field over the past decade, says Mustard. He notes that, to determine savings realized because of injuries that didn’t happen, the team compared the incidence rate of lost-time claims among the high OHS performers included in the study against the averages in their respective sectors. Had the team compared them to the lost-time claim rates of the poorest performers in their sectors—say, the bottom 25 per cent—the ROI would have been higher, he adds.

A summary of this research is available in an IWH Issue Briefing, published in May 2022.

How the study was done

This study builds on a 2017 project, also led by Mustard, that estimated average OHS expenditures by Ontario employers, based on information provided by 334 organizations. It was conducted using in-depth interviews with a person knowledgeable about OHS at each of the 334 employers.

The interviews were focused on how much participating organizations spent on the following five dimensions: 1) organizational management and supervision; 2) staff training in health and safety; 3) personal protective equipment; 4) professional services provided by external organizations; and 5) share of new capital investment attributed to improved OHS performance. Based on these interviews, the study team arrived at average estimates of OHS investment per employee, per year, in each of 17 Ontario sectors (see the open access article at doi.org/10.5271/sjweh.3778).

In this new study, the team turned to claims records from Ontario’s Workplace Safety and Insurance Board (WSIB). Using those records, the team identified organizations in the manufacturing, construction and transportation sectors with at least 100 full-time equivalent (FTE) employees and with incidences of work-related injury and illness from 2013 to 2018 that were at least 60 per cent lower than the average of their rate group. For each employer identified—289 in manufacturing, 88 in construction and 56 in transportation—the team applied an estimate of OHS expenditures, based on the per-employee per-year estimate from the 2017 study.

The team also calculated the number of claims averted at each participating employer by comparing its actual lost-time claims with its expected lost-time claims, which was assumed to be the average lost-time incidence of its rate group. To estimate the tangible costs of each averted claim, the team used a formula developed by the WSIB, combined with an estimate of indirect costs experienced by the employer. These averted costs were defined as tangible financial benefits.

The team also estimated and included the financial value of intangible benefits—an innovative feature of the study. It recognizes that employers with strong OHS performance may realize intangible financial benefits arising from improved employee retention and morale, improved production quality and strengthened corporate reputation.

Throughout the research process, the team consulted with representatives of leading employers to get feedback on the method. Employers with whom the study team consulted agreed that these intangible benefits were real and that they represented important organizational outcomes of strong OHS performance. The research team applied a plausible assumption that intangible benefits equalled tangible benefits in its calculation of the overall financial return.

The feedback we heard was that intangible benefits were substantial, and likely higher than what we estimated, says Dr. Basak Yanar, an IWH associate scientist and member of the research team.

An estimate of the return-on-investment in occupational health and safety is not a figure that many individual organizations can easily come up with on their own, says Mustard. OHS practitioners and leaders already know the importance of such investment. With these estimates of OHS ROI in three Ontario sectors, we hope we can help them show the value of such investment and further make the business case for OHS expenditures.