For employers, the cost of implementing health and safety initiatives can be expensive, and when they aren’t adhered to properly – they can cripple the internal economics of a business.
These costs can be divided into two sets – ‘human costs’ and ‘financial costs’; the first set focuses on the financial impact of illness or injury to an individual, whereas the second set concerns the business and the costs incurred because of an employee’s illness or injury.
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.
Together with Nifty Lifts, suppliers of access platforms to workplaces that implement stringent health and safety procedures, we assess the costs of health and safety mishaps – and how businesses can avoid them in the future to help save money.
Saving money on absence costs
If health and safety standards and procedures are implemented properly within the workplace, then this will reduce the likelihood of employees needing to take sick leave, and will help to reduce both the ‘direct’ and ‘indirect’ incurred financial costs to a business.
Direct costs
If a business continually encourages sound health and safety practices in the workplace, then direct costs could be reduced in the following areas:
- 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.
Indirect costs
As well as a business’ direct costs, there are further losses and financial implications faced by a business when health and safety procedures aren’t followed correctly, 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.
The insurance illusion
Many employers are under the illusion that if health and safety procedures aren’t implemented effectively, their insurance policies will be able to cover the costs of incurred by employee sickness or injuries. Unfortunately, for employees this isn’t the case.
All employers have a duty of care towards their employees, which means that employers need to have Employer Liability Compulsory Insurance, and will reduce insurance premiums – leading to more money in the bank in the long term. However, an employer’s insurance only covers a small number of incidents, and uninsured costs can often outweigh insured costs, which come straight off the businesses ‘bottom-line’ profits.
Costs that are incurred as a result of poor health and safety procedures, that aren’t covered by Employer Liability Compulsory Insurance, include the following:
- Sick pay
- Lost time
- The damage or loss of raw materials and products
- Plant and equipment repairs
- Temporary labour and overtime costs
- Delays to production
- Insurance investigation time
- Fines
- Business contract losses
- Legal costs
- The loss of business reputation
For any business, it’s important to establish whether their health and safety procedure is more likely to incur financial losses covered by insured costs, or whether these costs are covered by an insurance policy. Failure to provide reliable health and safety procedures that prevent illness and injury, may lead to increased insurance premiums or difficulty when obtaining future insurance cover.
The cost of illness or injury
In total, the financial costs and human costs incurred by the UK 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.
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. 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.
