For employers, the cost of implementing health and safety initiatives can be expensive.
However, when safety standards aren’t adhered to properly, the hidden financial costs can cripple the internal economics of a business.
In the UK, it is estimated that annually between 2015/16, 622,000 workers were injured at work, and 528,000 workers suffered a new case of ill health that they believed was brought on as a result of their working conditions. If these estimations continue to rise annually, then the financial costs to businesses could be staggering.
For some workers, the cost of neglecting health and safety protocols is higher still. HSE’s latest provisional workplace fatality figures, reveal 137 fatalities over 2016/17.
Together with Nifty Lifts, suppliers of access platforms to workplaces that implement stringent health and safety procedures, we look at the hidden costs of health and safety mishaps which employers can usually avoid by following safety protocols.
In total, the financial costs and human costs incurred by UK businesses between 2014/15 were set at £14.1bn.
£9.3bn of this overall cost was produced by workplace illnesses, equating to £17,600 per case, and £4.8bn was because of injury claims – which was an equivalent cost of £1.6m per fatal injury and £7,400 per non-fatal injury.
These costs can be distributed and attributed over three separate areas. £8bn of this overall figure was attributed to human costs incurred by individuals who either became ill or were injured when at work. £2.8bn was incurred by employers in financial costs, and a further £3.3bn was incurred by the government and the tax payer in contributions to workplace ill health and injury.
Employees can be faced with varying costs when it comes to employee illnesses and injuries; for example, a fatal injury could have cost a business £106,544 in pay outs, whereas non-fatal injuries were substantially lower, at £1,232 per case. Furthermore, those employees suffering from ill health – who are absent for more than seven days – could cost a business up to £8,219.
Hidden individual costs of injury and disease
As well as the financial costs, injuries resulting from an accident or industrial disease have a massive hidden cost to the individual. This can go beyond the immediate impact of the injury, for example many workers who are on long term sick later develop depression due to post-traumatic stress or simple frustration from being unable to work or from long term complications.
It isn’t only the employee who suffers, the impact of an injury can impact on their dependents, partners and friends.
This will likely result in a fine for the company and a requirement to pay compensation to the worker involved, but most would prefer to not have had the injury in the first place – compensation cannot replace a limb, the ability to play with your children or the ability to live life to it’s fullest.
Sickness absence costs
If health and safety standards and procedures are implemented properly within workplaces, this will reduce the likelihood of employees needing to take sick leave for industrial disease or health and safety related injuries. As well as any fines and/or compensation awarded in respect of any injury, sickness absence itself has both a ‘direct’ and ‘indirect’ financial impact on a business – which can add up significantly:
The direct costs of sickness absence includes:
- Paying the salaries of absent employees.
- The overtime costs that are incurred when available employees need to cover the work of an absent employee.
- Additional losses to profits due to the loss of output incurred by absent employees.
As well as a business’ direct costs, there are further losses and financial implications faced by a business when staff are absent from work, these can include:
- The time it takes for a new employee to learn a new role and become productive in the place of an absent employee.
- The diminished quality of a product or service when experienced employees are absent.
- A potential loss of business, continuity or reputation due to an inadequate number of staff.
- The recruitment of temporary staff or contracted agency workers.
- Providing training and support to staff unskilled in a particular job-role.
- If an injured employee is unable to return to their former role, additional damages could be awarded for loss of congenial employment
The insurance illusion
All employers have a duty of care towards their employees, and employers are legally required to have Employer Liability Compulsory Insurance.
Many employers are under the illusion that if health and safety procedures aren’t implemented effectively, their insurance policies will cover any costs they incur as a result. Unfortunately, this often isn’t the case.
Most providers only offer limited coverage. Often additional uninsured costs can outweigh insured costs – and these come straight off the businesses ‘bottom-line’ profits.
Costs that are incurred as a result of poor health and safety procedures, that aren’t usually covered by Employer Liability Compulsory Insurance, include the following:
- Sick pay
- Lost time
- Damage to or loss of raw materials and products
- Plant and equipment repairs
- Temporary labour and overtime costs
- Delays to production
- Insurance investigation time
- Business contract losses
- Legal costs
- Damage to business reputation/loss of customers
Businesses who are compliant and up to date with health and safety will save themselves the worry of these costs – and in addition, businesses with fewer accidents typically pay lower insurance premiums.
Those businesses who fail to prioritise health and safety and neglect to instill procedures that prevent illness and injury are likely to face increased insurance premiums or even difficulty when seeking a future provider for liability insurance.
The economics of safety
Although employers often implement and address their health and safety procedures, more often than not, they aren’t sustained and utilised by employees throughout an organisation on a day to day basis. This needs to change and employers need to reinforce policies and re-train regularly.
Employers also need to ensure that all workers are provided with the safety equipment and properly fitting PPE they need to do the job effectively – one size does NOT fit all and loose or badly fitting PPE is not effective.
The costs incurred by employers when employees become ill, or injured, sets a precedent for health and safety strategies that negate the accumulative costs of situations that arise when the health and safety of employees is compromised. Put simply, the costs are not worth the risk and employers need to prioritise health and safety for the health of both their staff and their profits.