Lost Time: How Does it Add Up?
Learn how companies are adding up lost time, and what it means from a profit perspective.
For safety professionals, lost time means any productive time lost as a result of a worker needing to take time off due to a work-related injury or illness.
For employers, lost time incidents also mean something more - a loss of profits.
Understanding lost time and how it’s calculated is essential to measuring the safety performance of an organization. In this article, we’ll cover the important aspects of lost time: what it is, why it’s important, and what it can tell you about your organization.
What Is Lost Time?
An injury is considered a lost time injury if it is sustained on the job and the injured worker meets one of the following conditions:
- They are unable to work perform their regular job duties
- They require time off to recover from the injury
- They must be assigned modified work while recovering
To better understand the concept, let's draw up an example.
A sawmill operator is injured when a large woodchip ricochets and hits them in the eye. Thankfully, the injury isn’t permanent, but they will miss seven work days while they recover from it. If they work ten-hour shifts, that means the total lost time for this woodchip injury is 70 hours.
The same would be true if this employee could return to work but wasn’t able to operate the sawmill equipment until their vision fully recovered. If they’re assigned modified job duties (like doing housekeeping tasks or helping load trucks) for a total of 70 hours, it would still count as 70 hours of lost time.
How to Calculate Your LTIR
The lost time injury rate (LTIR) of an organization, a jobsite, or a department is calculated using a simple formula. The total number of lost time injuries in a given period is divided by the total number of hours worked in that period. The result is then multiplied by 200,000.
LTIR = (LTIs / hours worked) x 200,000
If you’re wondering about that 200,000 multiplier, it’s a constant that OSHA uses to ensure a fair comparison across companies of different sizes. It represents the approximate number of hours 100 full-time employees would work over the course of a year (assuming they each work 40 hours a week for 50 weeks).
Your LTIR is a snapshot of your safety performance, and one that you can use as a comparison across departments or to see how you measure up to other organizations in your industry.
How to Calculate Your LTIFR
Another related measure is the lost time injury frequency rate (LTIFR). To calculate your LTIFR for a given period of time, multiply the number of lost time injuries during that time by 1,000,000. Then divide that number by the total hours worked during that same timeframe.
LTIFR = (LTIs x 1,000,000) / hours worked
Your result will show you the number of lost time incidents for every million hours worked.
Why the huge multiplier? In this case, it’s because dividing lost time incidents by total hours worked will result in a miniscule number. A number that small feels abstract, is more difficult to communicate, and makes other calculations more complicated. Multiplying by 1,000,000 leaves you with a number that is more legible and far more useful.
(Learn about Leveraging Leading Indicators to Drive Safety)
Why Lost Time Adds Up to Lost Profits
Every employee is a valuable asset to a company and every hour they put in translates to more profit for the organization. It’s never easy to put a number on it, but let’s say that every hour of work translates to $10 of profit for the company. Returning to our example of the sawmill operator - that hypothetical injury resulted in a total of 70 hours of lost time. That would mean a $700 loss of profit.
That might not sound like a big hit to a company’s overall profitability, but it’s only the tip of the iceberg.
The total cost of lost time incidents are extensive. In addition to that $700, you have to factor in the cost of replacing the worker while they’re off work. If the incident resulted in any equipment or property damage, add that to the total as well. Then you’ve got worker’s compensation, healthcare claims, and increased insurance premiums to worry about.
Additionally, there are various indirect costs like reduced employee morale following a serious incident. These are more difficult to quantify but can nevertheless be substantial.
That initial $700 can quickly snowball into a lot more. And that’s just one lost time incident. It’s likely that more will follow over the course of a year, and some of those incidents could take multiple employees off the job.
Lost Time and Your Bottom Line
Let’s consider some real-world examples of lost time events to give you a clearer sense of what can be at stake.
A gold mining company operating in Vietnam had to shut its operations after being hit by typhoons that caused flood damage in core tunnels. It took six months before those tunnels could be pumped out and work could resume. The cleanup and repair costs were huge, but the biggest blow came as a result of the stoppage making shareholders nervous, plummeting the company’s stocks.
Now take the flooding that occurred in Alberta, Canada in 2013. Highways and buildings were engulfed in water, including Calgary’s downtown core. City officials declared an emergency shutdown and put a stop-work order in place, resulting in approximately one million dollars in lost time cost per day.
Finally, consider a more personal situation. Imagine being laid up and unable to work for six months. Think of all the dollars of lost wages and the other losses in maintenance and upkeep. It’s easy to be hung up on obvious expenses, like those paid out in compensation or the expense of servicing or replacing equipment. However, once the real cost of lost time is factored in, it becomes obvious that it should be an important concern for any company leader.
(Learn more in Lessons From 3 of the Worst Workplace Disasters)
Staying Safe and Staying Profitable
Workplace safety is essential for preventing injuries, but it also improves the overall success of the business. Safety affects every aspect of a company, whether directly or indirectly. So making sure that everyone can work safely isn’t just the right thing to do - it’s also the only way for a company to continue turning a profit.
Lost time injury rates are only lagging indicators. That means they provide a picture of a company’s past performance, not an indication of how well it will perform in the future. By tracking them, however, you can assess whether you’re moving in the right direction and what areas need the most improvement.
You can’t undo a lost time injury. But if you take the time to understand why it happened, you can take steps to prevent them from occurring again.