In brief
The items of an occupational accident that appear in the accounts are usually compensation, SGK recourse claims and administrative fines. Indirect costs such as line stoppages, scrap, overtime, replacement staff, retraining and management time are spread across other accounts and are not recorded as accident costs. Totalling these items in hours and units using the business's own production, payroll and maintenance data provides a realistic basis for decisions on OHS investment.
Why is the cost of an occupational accident underestimated?
On a Tuesday morning in the dispatch area, a forklift strikes the foot of an employee stepping out from behind a pallet. The employee is taken to hospital and is on sick leave for three weeks. When the accident is discussed at the management meeting at the end of the month, the only figure on the table is the lawyer's estimate of possible compensation. Yet on the same day the line stopped for two hours, a customer shipment slipped to the next day, overtime covered the absent employee's place for three weeks, and a manager and two specialists devoted days to investigating the accident. None of this is recorded as an occupational accident cost.
The problem is not bad intent but the structure of the accounts. Overtime is booked to payroll, scrap to the quality report, repairs to the maintenance budget, the late shipment to customer relations. Because there is no record linking them to the accident, the business never sees how much the accident itself cost it. This article proposes a simple method you can use to make that link.
The iceberg model: visible and hidden items
In OHS literature, the iceberg model is used to describe the direct part of accident costs above the waterline and the indirect part below it. In the 1930s, H. W. Heinrich suggested that indirect costs were about four times direct costs; later studies showed that this ratio varies greatly by sector, type of accident and the structure of the business. So instead of multiplying by a fixed ratio, you need to count your own items.
| Item | Type | Where does it fall in the accounts? |
|---|---|---|
| SGK recourse claims, compensation, lawyer and expert fees | Direct | Legal and litigation expenses |
| Administrative fines | Direct | Fines and late payment expenses |
| Line stoppage and lost production | Indirect | Production efficiency report |
| Scrap and rework | Indirect | Quality costs |
| Damage to equipment, product or buildings | Indirect | Maintenance and repair budget |
| Overtime and replacement staff | Indirect | Payroll |
| Training the new employee and settling-in time | Indirect | Human resources and training |
| Accident investigation and management time | Indirect | Nowhere (invisible) |
| Customer delivery delays and reputation | Indirect | Sales and customer relations |
The treatment and payments the SGK (Social Security Institution) makes to the employee may at first sight seem to have nothing to do with the business. However, if the employer is at fault, these payments come back to the employer through recourse under Art. 21 of Law No. 5510; in cases of permanent incapacity or death, this item can become very large. For details see our article on the occupational accident recourse claim.
Indirect costs of accidents: where do you get the data?
You do not need to set up a new system for the indirect costs of accidents; the data is already in the business's other records. What needs to be done is to link these records to one another with an accident number.
| Indirect item | Data source | Unit of measure |
|---|---|---|
| Line stoppage | Production tracking system or shift report | Hours |
| Lost production | Difference between planned and actual output | Units |
| Scrap and rework | Quality records | Units or kg |
| Equipment repair | Maintenance work order | Hours + spare parts |
| Overtime | Payroll and timesheets | Person-hours |
| Replacement staff | Temporary assignment records | Person-days |
| Accident investigation | Investigation team's meeting records | Person-hours |
| Retraining | Training attendance records | Person-hours |
| Customer impact | Shipment and complaint records | Number of late orders |
You multiply each item by the business's own unit cost: the line's hourly contribution margin, the average hourly labour cost, the scrap cost per part. Accounting and production planning already know these unit costs; the OHS team's job is to total the quantities.
Sample calculation: the indirect items of a forklift accident
Let us total the quantities in hours and units for the forklift accident in the introduction. The figures are examples; use your own records for your own accidents.
| Item | Quantity | Calculation |
|---|---|---|
| Work stoppage in the dispatch area | 2 hours × 6 employees | 12 person-hours |
| Extra loading for the delayed shipment | 1 shift of overtime × 3 employees × 3 hours | 9 person-hours |
| Covering the absent employee's place | 15 working days × 2 hours overtime | 30 person-hours |
| Accident investigation and root cause analysis | 4 people × 3 hours | 12 person-hours |
| Management meetings and correspondence | 3 managers × 2 hours | 6 person-hours |
| Inspection and repair of the forklift | Maintenance work order | 4 hours + parts |
| Corrective action training | 20 forklift operators and pedestrians × 1 hour | 20 person-hours |
| Damaged product | Product on the fallen pallet | In units, from the quality record |
This single accident produced about 89 person-hours of labour, 4 hours of maintenance and damaged product that nobody noted as a "cost". When you multiply these lines by your own hourly cost, a second column appears next to the estimate of possible compensation. Also take into account that overtime is paid at a higher rate than normal hours.
Legal items: fines are a direct cost too
In the inspection carried out after an accident, not only the shortcoming that caused the accident but the general condition of the workplace is examined. Some basic administrative fine amounts applicable for 2026 are:
- Not notifying the SGK of the accident on time: 44,443 TL. Under Art. 14/2 of Law No. 6331 on Occupational Health and Safety, an occupational accident is notified within 3 working days after the accident.
- Not keeping records of accidents and occupational diseases: 33,326 TL.
- Not carrying out a risk assessment: 66,725 TL; 100,119 TL every month the breach continues.
- Not giving an employee OHS training: 8,980 TL per employee.
Amounts other than those calculated per employee are increased under Art. 26/3 according to the workplace's headcount and hazard class. To calculate for your business, you can use our OHS administrative fines tool. We listed the steps to take after an accident in our article on what to do after an occupational accident.
How is OHS return on investment calculated?
Once you start measuring indirect costs, you can also give a data-based answer to the question of OHS return on investment. A simple approach is:
- Choose a recurring accident type. For example, forklift–pedestrian contacts in the dispatch area over the last three years.
- Work out the average cost of one incident. The sum of the direct items and the indirect items in the table above.
- Find the expected annual loss. Average cost × number of incidents expected per year. Consider accidents and near misses together for the number of incidents.
- Write down the cost of the measure. The installation and annual running costs of investments such as segregated pedestrian routes, barriers, forklift speed limiters and warning lights.
- Compare. Make a realistic estimate of how much the measure will reduce the number of incidents; return on investment = (annual loss prevented − annual cost of the measure) ÷ cost of the measure.
This calculation is not perfect; the human cost of a fatal accident or permanent disability that is prevented cannot fit in any table. But saying to management "this measure prevents the many person-hours we have lost in this area over the last three years" instead of "let's take this measure" speeds up the decision. The hierarchy of controls should still be the basis for prioritising measures.
How do you set up an accident cost record?
The impact of an accident on the business only becomes visible through regular records. Add a "cost annex" to your accident report form and fill in these fields:
- Accident number, date, department and type of incident,
- Line or department stoppage time and number of employees affected,
- Lost production and quantity of scrap,
- Repair work order number and duration,
- Lost working days and the overtime or replacement assignments made during that period,
- Person-hours spent on investigation, meetings and training,
- Customer and shipment impact.
The OHS specialist starts the form; production, maintenance and human resources complete their own lines within a few weeks after the accident. Once a year, collect these annexes and present them to management together with accident frequency and severity rates; add an indicator such as "person-hours lost per accident" to your set of OHS performance indicators.
In our OHS specialist service, we carry out accident investigations with root cause analysis and work with the production and human resources departments to complete the cost annex. In businesses in Bursa and the surrounding provinces, this record becomes the most useful document for defending the OHS budget.
Frequently Asked Questions
How many times greater are indirect costs than direct costs?
There is no fixed ratio. Studies carried out after Heinrich's proposed ratio of four times showed that the ratio varies greatly by sector and type of accident. For a reliable result, count the items of your own accidents.
Is the employer bound by the payments the SGK makes to the employee?
Yes, if the accident resulted from the employer's intent or breach of OHS legislation. Under Art. 21 of Law No. 5510, the Institution has the employer pay the payments it has made and will make, together with the initial capital value of the pension it has awarded, limited to the amount the employee could claim from the employer.
Is it worth calculating the cost of minor accidents?
Yes. Minor accidents are numerous, and each creates line stoppage, investigation and first aid time. Over a year in total, they can approach the indirect cost of a serious accident.
Do near misses have a cost?
They mostly generate only a short stoppage and investigation time. Their real value is that they give the opportunity to see in advance the cost that would arise if the same incident ended in an accident.
A certified specialist matched to your hazard class: site inspections, approved logbook, training plan, annual plan and report follow-up.
Bursa SİSTEMER OSGB Technical Team — written from the field experience of our OHS specialists and workplace physicians. Legal information is valid as of the publication/update date; contact us for an assessment specific to your business.