What are the financial impacts of drugs and alcohol at work?

How drugs and alcohol at work can hurt your bottom line

Whether you work in an office or on an oil rig, employers have a duty of care to provide a safe workplace environment. But when an employee is impaired by drugs and alcohol, the health, safety and financial consequences can be devastating.

In many industries, such as road and rail transport, maritime and mining occupations, the law provides a legal blood alcohol level and prohibits workers from being affected by drugs of any kind (prescription or illicit).

Other companies have their own policies about alcohol and illicit substances. This is important when a worker uses heavy machinery or is in danger of injuring or killing themselves or another person.

In industries without legislation, the impacts of drugs and alcohol in a workplace can be tricky to manage. However, if a person is under the influence, it’s bound to affect the way they do their job, no matter what it is. This is almost certainly going to have consequences for your business bottom line.

Here we look at some of the financial impacts of drugs and alcohol at work.

Absenteeism and Presenteeism

One of the major effects of drugs and alcohol at work is the impact it can have on absenteeism. Australian workers admit they’ve taken a staggering 11.5 million sick days per year because of alcohol and drug use.

All those sick days make a huge financial impact on our businesses – they cost workplaces about $3bn a year (1).

These days off aren’t just being taken by alcohol and drug dependent people either. According to the Australian Safety and Compensation Council (2), it’s those moderate drinkers who occasionally drink to excess or use illicit drugs who make the biggest impact.

When those impaired workers have a big weekend, then turn up to work, it can also cost your business. According to Knowledge Manager for Policy and Advocacy for the Alcohol and Drug Foundation Laura Bajurny, presenteeism can be a huge issue in the workplace. This is when workers turn up but work at less-than-optimal levels.

“If someone is experiencing the aftereffects of drugs or alcohol, it can impact their productivity. It’s not always as noticeable – small mistakes, forgetfulness, not producing what you normally would. It might seem like a small figure, but it really adds up over time,” she said.

It’s believed that alcohol alone leads to $6bn in reduced productivity (3) in Australia each year.

Hiring costs and the impact on workplace culture

For all that lack of productivity, there’s another key group who feels the pinch–their colleagues. One study suggests (4) that one in 10 employees have been impacted by another colleagues’ use of alcohol. They may have covered for them by doing their work or were involved in an accident or close call.

“You don’t want to go into work, particularly if you’re working with heavy machinery, and be worried that your colleague hasn’t slept in a few days or isn’t on their game,” Laura said.

Employee retention is often a key goal to any business, as the cost of frequent staff turnover can be debilitating. Having a safe and productive workplace is key to staff retention.

“Everyone wants to work in a safe environment,” Laura said.

Insurance and financial implications

When workers aren’t performing at their best, it can lead to mistakes. And in some industries, it can have catastrophic consequences, particularly when there are machinery and vehicles involved.

In any insurance policy, there are drug and alcohol exclusions. However, according to Founder and Managing Director of Crucial Insurance Tony Venning, it depends on how much the employer knows.

“Say you’re a business owner who has multiple vehicles and a number of employers who use these cars. If they have an accident while they’re under the influence and if you as an employer can demonstrate that you weren’t aware they were driving under the influence, then your policy will respond and will cover the company owned vehicle, any damage to it and any third-party property,” Tony said.

However, the insurer will do an investigation and if they find any evidence that the employer suspected the person was impaired by drugs or alcohol, then they will deny the insurance claim.

“An employer doesn’t want to get caught up in that. There’s a strong onus for employers and businesses to make sure they’re across it,” Tony said.

Workers’ compensation claims can also be denied if there is evidence of drugs or alcohol.

When an insurance company denies any type of claim, it can impact any insurance that the business applies for over the next few years.

“It will result in your renewal getting declined. And once you have that, it’s like a bad credit score and your insurance history is compromised. Under your duty of disclosure to any new insurer, you have to disclose all relevant facts… Once you have an insurance record that has been declined because of drugs or alcohol, it’s very hard to get insurance full stop,” Tony warned.

Reputational damage

When the workplace has a culture of alcohol or has shown a blind eye to drugs, it can impact the company’s reputation.

This can change the type of people who apply for jobs, which impacts the overall culture.

“Do you want to have a workplace that is known for being indulgent around alcohol or has a drug focused culture? That’s going to attract a certain type of employee, but it’s going to drive away other employees who aren’t interested in working in that type of environment,” Laura explained.

Unfortunately, even one story in the media about an employee who did the wrong thing can have a detrimental impact on your reputation.

How can you manage your drug and alcohol risk?

To lower your financial risk of drug and alcohol in the workplace, there are some things you can do:

  • Create a drug and alcohol policy so workers know what’s acceptable, and what’s not.
  • Educate your staff about this policy through regular trainings and in employee induction.
  • Set up a drug and/or testing program and outline these procedures in your drug and alcohol policy.
  • Provide a positive, safety-focused culture where employees can confidentially report any concerns they have about drugs and alcohol at work.
  • Provide employees with the right support to manage their addiction, including access to counselling or an Employee Assistance Program (EAP) where available.

References

  1. Ann Roche, Ken Pidd, Victoria Kostadinov. Alcohol- and drug-related absenteeism: a costly problem. s.l. : Australian and New Zealand Journal of Public Health, 2016. 40:236-8; doi: 10.1111/1753-6405.12414.
  2. Smith, Dianna. Work-related Alcohol and Drug Use – A Fit for Work Issue. Canberra : Australian Safety and Compensation Council, 2007. ISBN 978-0-642-32632-4.
  3. Australian Institute of Health and Welfare. Alcohol, tobacco & other drugs in Australia. Canberra : Australian Institute of Health and Welfare, 2021. v16.0.
  4. The burden of alcohol drinking on co-workers in the Australian workplace. Livingston, Caroline E Dale and Michael J. 3, s.l. : The Medical Journal of Australia, 2010, Vol. 193. doi: 10.5694/j.1326-5377.2010.tb03831.x.