The Costs of Workplace Drug & Alcohol Abuse

The widespread negative impacts of drug abuse upon employee safety and corporate financial performance clearly demonstrate that companies can no longer remain idle. Nor can they rely upon traditional drug testing methods, such as urine-based preemployment drug testing. 

" Workplace  injuries alone cost Americans $156.2 billion annually." 

" Conservatively, corporations lose an average of $1 Million Dollars for every 1,000 people employed due to drug abuse in the workplace. "

The consequences of drug abuse are tragic for users and their families, as well as co-workers and others put at risk by their actions. Despite the costs of workplace substance abuse outlined below, many companies remain hesitant to invest in programs to identify and reduce drug and alcohol use.      

Research has indicated that many senior executives are not aware of the impacts of substance abuse, thus proper resources are simply not being allocated.  

It has also been reported that the implementation of drug testing has been influenced by various state regulations, despite the fact that the United State Supreme Court has set precedent support drug testing, including random drug testing.

Published reports indicate that employers loss over $150B annually to workplace substance abuse.  The actual loss to employers however is likely far greater:

The percentage of drug (not including alcohol) abusers in the workplace is believed to greater than 10% of all persons employed.

The costs impacts of drug abuse in certain industries, such as construction, are in the $60,000 per abuser range vs. and average cost of $10,000, with catastrophic events easily exceeding millions of dollars.

Specific negative cost impacts linked to workplace drug abuse:

• 50% of workplace accidents - hundreds of thousands of injuries are linked to workplace accidents

• Up to 60-70% of crime and instances of workplace violence

• 300%-400% higher health benefit utilization for abusers

• Higher workers’ compensation premium costs

• 10x absenteeism rates and 30% higher turnover rates

• 40% of employee theft/inventory shrinkage

Additional Cost Impacts:

• Productivity / production loss
• Equipment / site damages
• Liability suits
• Administrative costs

Accidents, Injury, & Workplace Violence

Research studies and the experiences of corporations and insurers indicated that over 50% of reportable workplace accidents are related to drugs and/or alcohol.

Workplace violence and crime also have been linked to substance abuse, with  substance abuse ranking third-as a cause of workplace violence.  As many as 70% of all arrestees have current substance abuse issues or histories of substance abuse.  

Inventory Shrinkage/Employee Theft

Employee theft is the leading cause of inventory shrinkage, and 80% of drug abusers steal from their workplaces to support their drug use.  Annual research consistently indicates that 47% of all inventory shrinkage is du employee theft, while individual corporate studies have also demonstrated the linkage to drug abuse.   In the retail sector, for example, employee theft consistantly outpaces shoplifting and all other forms of inventory shrinkage, and is the only category to remain unmanageable. 

Workplace Violence

Workplace violence and crime also have been linked to substance abuse, with  substance abuse ranking third-as a cause of workplace violence.   As many as 70% of all arrestees have current substance abuse issues or histories of substance abuse.  

References:

Cornell University / IRMI (Insurance Risk Management Institute) / Corporate case studies.

Security Journal, Vol. 5, No. 1, January 1994, note 14, page 32.

National Retail Federal Annual Survey 2007

Office of National Drug Control Policy, The Economic Costs of Drug Abuse in the United States, Washington,   D.C., Executive Office of the President.  2007

Reaves, James J., Drug Crimes in the Workplace: A Survey of Drug Use and Its Effects on Crimes in the Workplace, and a Small Study of Workplace Drug Abusers Under Rehabilitative  

SHRM Survey Reveals Extent of Workplace Violence, based on a 1994 survey by the Society of Human Resource  Management, EAP Digest, March/April 1994, p.25.

How can you judge if your organization will benefit from a drug-free workplace program?

The following information can help you assess the risks, costs, and benefits in relation to your own needs and resources.  (Source: http://ncadi.samhsa.gov)

Assessing Your Workplace

The assessment process is not an exact science. There are no right or wrong answers. One way to begin an assessment is to analyze the cost of alcohol and other drug abuse, such as health care utilization costs and losses due to theft, absenteeism, and accidents. Monitoring these same costs over time can help you assess the impact and success of your drug-free workplace program.

The risks, costs, and benefits will differ with every organization. A careful assessment can show which program options offer clear advantages and are affordable and which ones are not needed at this time. The following are some questions you should ask when deciding the best course of action.

What Are the Risks?

Consider for a moment a variety of scenarios in which a substance abuser might affect your workplace:

Do certain employees perform key functions of the organization?  

    * Brokers handling large sums of money

    * Technicians monitoring essential equipment such as computers, nuclear power dials, etc.

    * Salespersons representing the company   

Do you have employees in positions where alcohol or other drug abuse would be difficult to detect?  

    * Employees who work at home

    * Traveling salespersons

    * Home health care workers   

Do you have employees in "safety sensitive" jobs?  

    * Driving vehicles

    * Operating machinery

    * Managing a place of public entry such as a security checkpoint   

Do you have employees in "security sensitive" jobs?  

    * Responsible for inventory or stock

    * Responsible for ideas, products, plans, and proprietary material

    * Responsible for financial accounting or cash

    * Responsible for confidential documents 

Then ask: Can you afford to lose a valuable employee who is in trouble?  

    * Will loss of the employee affect this year’s productivity and bottom line?

    * How much will it cost to recruit, hire, and train someone new?

    * What do you predict would happen to production and client satisfaction if an alcohol or other drug abuse problem goes unresolved? 

For some employers, one accident, one major financial problem, or one breach of confidentiality can place the entire operation in jeopardy. If someone in your workforce is not fit to perform his or her job because of alcohol or other drug abuse, the risk may be significant.

What Are the Benefits?  

Drug-free workplace programs can have both short- and long-term benefits. Employers who have already started drug-free workplace programs report significant benefits:

Short-Term Benefits:  

    * Cost savings and incentive programs offered by

          Medical and health insurance carriers

          Property, casualty, and liability insurance carriers

          Workers’ Compensation insurance carriers 

    * Less chance that a current user/abuser will apply for a job or be hired

    * Ability to respond quickly when problems with alcohol or other drug abuse arise

    * Fewer accidents

    * Fewer disciplinary actions

    * Reduced losses due to absenteeism, theft, and fraud 

Long-Term Benefits:  

    * Improved employee morale and productivity

    * Lower costs due to losses and errors

    * Reduced costs of insurance claims

    * Greater employee awareness about alcohol and other drug abuse as well as other health issues

    * Earlier identification and resolution of problems affecting job performance

    * Decreased legal costs and costs of hiring and training new employees 

The Department of Labor took a comprehensive look at the costs of alcohol and other drug abuse in the workplace. Some costs were easy to see. Others were hidden costs employers might not normally think about. The list below offers a basis for assessing the possible costs of alcohol and other drug abuse in your workplace:

Absenteeism Wages paid for days absent or for time tardy

Wages paid for temporary staff to fill in

Accidents/Damage Wages paid for days absent

Wages paid for unproductive hours during downtime

Wages paid for temporary personnel

Increased expenses for medical claims

Cost of replacing damaged equipment

Legal fees, court fees, investigative fees, travel costs

Health Care Increased costs for insurance, physicians, and hospitalization

Employee time lost

Administrative costs

Theft/Fraud Wages paid for unproductive hours during downtime

Cost of repairing damage or replacing stolen items

Cost of hiring security services and/or consulting services

Legal fees, court fees, investigative costs, travel costs 

In addition, business opportunities may be lost because people are not on the job or are not fully productive. Another major cost is the time spent by coworkers, supervisors, and administrators who must find ways to get the work done when someone is not pulling his or her weight.  

Keep in mind that while there may be more cases of alcohol and other drug abuse in larger firms than in smaller ones, a single troubled employee can have a major impact on a smaller firm.

Calculating the Cost of a Drug-Free Workplace Program  

A common response to the idea of a drug-free workplace program, especially among smaller organizations, is "Fine, I’d like to do something, but what will it cost me?" The costs will vary depending on how much you want to do (a decision based on your assessment of the risks), how much help you can get from your local community and other resources, your geographic location, whether or not you hire consultants, and other details of your overall program. As you review your costs, keep in mind that a drug-free workplace program will also bring the benefits listed in the previous section.

A drug-free workplace program could include costs for:

    * Policy development and review

    * Employee education and training

    * Supervisor training

    * Employee assistance

    * Drug testing 

To find out how much your particular program will cost, break the program into components or tasks, then estimate the number of hours that might be spent by you or others on each one and multiply by the hourly rates. Below are some of the tasks that are typically involved in developing a program:

    * Write a policy or develop a program. Costs should include a review by your attorney.  

    * Train your supervisors or employees yourself, using the available materials, or hire a third party.  

    * Consult with other employers in your area who are addressing the problem of alcohol and other drug abuse in the workplace. Work together on shared program costs to save time and money.  

    * Create an employee team to develop a policy and implement training under your direction.  

    * Ask your insurance company for assistance with developing a program and educating employees. Also, ask for help in reviewing alcohol and other drug abuse treatment options that may be covered under your insurance plan.  

    * Contact a local treatment center, or employee assistance program to obtain treatment options for employees or referrals to treatment facilities .  

    * Consult with drug free workplace service providers such as oral fluid test providers and / or laboratories.

Even if you can’t offer insurance coverage for treatment, you can help your employees and save rehiring and retraining costs by:  

        * assuring employees continued employment if they successfully seek treatment on their own for an alcohol or other drug abuse problem;

        * offering sick or unpaid leave while they are recovering;

        * helping employees find the best local treatment for the cost; and/or

        * offering to share the cost of treatment.   

Commitment by the organization’s leadership and program managers is a requirement.

"The employer needs to be a role model for a company with a drug-free program "

"A workplace will only be drug-free if the program applies to everyone -- employees, managers, and owners alike."

"There can’t be any favoritism or bias -- the program has to treat everyone who might need help in the same way." 

Any employer who plans to do something about alcohol and other drug abuse should ask a few key questions:  

    * Am I ready to be a role model? Can I set the example that I want everyone to follow?

    * Can I ensure that my program will apply to all levels of the organization?

    * Am I ready to support the program and the policy for all employees, not just those in favored positions?

    * Am I willing to insist that troubled employees get help, regardless of their rank? 

Weighing the Risks, Costs, and Benefits

With the risks, costs, and benefits in mind, only you can decide the best course of action for your organization.

Below is a sample of what other employers have found:

 "Like any company, I found that I wasn’t immune to substance abuse. My best worker got himself in trouble, and I just couldn’t sit back and do nothing. I created a policy, informed my managers, and had them tell the employees exactly what the company expected and the consequences of drug use on the job. I can’t offer treatment, but I give time to recover -- it’s better than trying to replace good people. Sure it costs me something -- but my employees seem grateful that I took action and now everyone knows what to expect."

Owner of a data processing company

"At first it seemed like too much trouble. But I called my insurance company and got help from some other employers in the area who were dealing with this problem. It isn’t so hard, and although my employees were surprised when I first told them about the program, they seem fine about it now, even relieved -- not to mention that in the last 2 years, my insurance costs and absenteeism have both gone down."

Owner of a print shop

"At the very least, a drug-free workplace program means that when a substance abuse problem comes up, everyone knows what to do. For me, a quick response and the prevention of a single transaction mistake or theft means the difference between a good bottom line and a disappointing one."

Manager of a real estate company

"I just can’t do all of the parts of a full drug-free workplace program right now. But I’ve learned a lot about this issue. I know that, at best, a drug-free workplace program can save a life. For some employees, awareness -- asking questions about themselves and drugs -- and knowing that my policy is there can open the door to change. I can encourage them to seek treatment. I really believe that a worker who is recovering is a productive worker, and better than no worker or someone who doesn’t know the job."

Manager of a chemical company

"Boiled down, what I’m saying to my employees is this: The safety, health, and productivity of this workplace, the employees, and the public are all things I value highly, and threatening them by using or abusing substances puts your employment at risk. If you don’t listen, you could be disciplined or lose your job. I’ll answer whatever questions you have because this is important. That’s it. That’s the bottom line."

Owner of a trucking company